Overconfidence, gender and tax compliance: The Indonesian evidence

Abstract

Tax compliance is a psychological contract between taxpayers and the government, so understanding the internal factors of taxpayers is important, including overconfidence and gender. Previous studies have separately analyzed the effect of overconfidence and gender affect tax compliance. Thus, this study relates overconfidence and gender with tax compliance decisions. We generate the data by using the embedded vignette method to survey selected Indonesian taxpayers by the accidental sampling method. By using one-way anova and two-way anova (for robustness tests), the results demonstrate the different tax compliance levels between overconfident taxpayers, confident taxpayers, and underconfident taxpayers. Next, this study also shows gender difference, namely masculine and feminine, results in significantly different tax compliance. Other findings also indicate that the interaction between feminine taxpayers and underconfident taxpayers exhibits the highest tax compliance. The results of this study can be used as a reference for the government to improve tax compliance by adjusting tax programs in accordance with the taxpayer’s behaviour.