THE INFLUENCE OF REDUCING RATES AND METHODS OF TAX CALCULATION ON TAXPAYERS COMPLIANCE OF SMALL AND MEDIUM MICRO BUSINESS: EXPERIMENTAL STUDY IN YOGYAKARTA

Abstract

This study investigates whether the issuance of Government Regulation No. 23/2018 regarding the reduction of Micro, Small, and Medium Enterprises (MSME) tax rates and changes in reporting methods will affect the preferences of MSME taxpayer compliance. The study was carried out on MSME actors in Yogyakarta using experimental laboratory methods. The test results showed that the reduction in tax rates increased the preference for MSME taxpayer compliance. When they were given a choice to determine the method to be used in calculating taxes, 50% of participants chose to use the final tax rate, and the rest used the normal tax rate method. The chosen option was not based on the complexity of the method but because of the feeling of the fairer sense. At last, participants did not refuse when they were required to calculate tax using the normal tax rate method after seven years. The test results indicate that the issuance of Government Regulation No. 23/2018 will be able to increase MSME taxpayer compliance in the future.