Investigations of Readiness Tax Compliance dynamics: studies on MSME of creative economics actors in Indonesia

Abstract

This study examines the dynamics of tax compliance readiness: Micro, Small, and Medium Enterprises (MSMEs) in Indonesia. The purpose of this study is to use the partial least square approach to experimentally assess the dynamics of tax compliance readiness through public trust in the tax authority and knowledge of taxpayers. This study uses quantitative methods with a sample of 100 respondents. This research focuses on the creative economy of SMEs, especially fashion. Data analysis shows that there is a positive effect of knowledge on tax compliance, meaning that an increase in tax knowledge can lead to an increase in tax compliance. Interestingly, this work describes these dynamics with fairly good knowledge but will reduce tax compliance. Meanwhile, trust in taxpayers is inversely proportional to taxpayer compliance, because there is an obligation to trust taxpayers. Therefore, the implication is that taxes do not only socialize tax rules and convey the importance of paying taxes for development, but also need to provide services on how to improve business, especially for SMEs through a business development system.