Tax Compliance in Indonesian MSMEs: Key Factors Explored

This study investigates the factors that impact tax compliance in Micro, Small, and Medium Enterprises (MSMEs) in Indonesia, focusing on tax knowledge, tax sanctions, tax corruption, and information technology utilization. A survey of 200 MSMEs in Jakarta and SEM-PLS analysis found that tax knowledge does not significantly affect tax compliance. Tax sanctions proved to be a significant motivator for tax compliance, while tax corruption negatively eroded trust in the tax system. In addition, it was found that information technology moderates the effect of tax knowledge on compliance, suggesting the potential to improve tax understanding and simplify processes. The practical implication is the importance of implementing stricter tax penalties, the use of technology in tax education, and increased transparency in tax administration to mitigate corruption and encourage tax compliance among MSMEs. The findings provide theoretical contributions and practical implications in designing effective strategies to increase tax compliance and government revenue .


INTRODUCTION
As a country undergoing development in various development sectors, Indonesia continues to look for ways to increase funding sources, including by increasing domestic revenue streams such as taxes.According to Law Number 28 Year 2007 of the Republic of Indonesia, tax payment is an obligation to the state, which both individuals and business entities carry out to support various interests and the prosperity of society.
The Central Bureau of Statistics data for 2020-2022 indicates that income tax is a major source of state revenue in Indonesia, with a notable contribution from the MSME sector, which is a key component of the national economy.Although the number of MSMEs continues to increase along with GDP growth, the proportion of tax contributions from this sector is still low, mainly due to insufficient tax compliance.
The government has reduced the final tax rate for MSMEs from 1% to 0.5% through Government Regulation (PP) No. 23 Year 2018.One of the objectives is to improve tax compliance by attracting more MSMEs to register as taxpayers and voluntarily fulfill their tax obligations.Data from the Directorate General of Taxes (DJP) for 2023 indicates that only around 60% of MSMEs are registered taxpayers.This low level of tax compliance can lead to tax evasion and have a negative impact on state revenue.Therefore, special attention from the government is needed to increase tax awareness and compliance among MSMEs players.
Tax knowledge significantly affects tax compliance among micro, small, and medium enterprises in Indonesia (Juniarti & Anggrahini, 2020).Knowing taxation allows MSMEs to understand tax obligations' rules and regulations, enabling them to fulfill these obligations accurately and on time (Dewi & Supadmi, 2019).Moreover, tax knowledge stills a sense of responsibility and awareness among MSMEs regarding their tax obligations and the consequences of non-compliance (Susanto et al., 2020).As a result, MSMEs with a higher level of tax knowledge are more likely to comply with their tax obligations than those with limited or no tax knowledge (Lestari & Daito, 2020).
On the other hand, it can be argued that the level of tax knowledge does not necessarily directly correlate with tax compliance among MSMEs in Indonesia.Some MSMEs may have a high level of tax knowledge but still choose to evade taxes due to various reasons, such as distrust in the government's utilization of tax revenue, complex and burdensome tax processes, or simply being unable to afford the taxes (Susanto et al., 2020).Additionally, the lack of resources and access to tax experts or consultants may also hinder MSMEs from fully understanding and complying with the tax regulations, regardless of their level of tax knowledge (Nasution et al., 2020).Therefore, while tax knowledge is essential, it may not be the sole determining factor in ensuring tax compliance among MSMEs in Indonesia.
In today's digital era, the role of technology in influencing various aspects of our lives cannot be ignored.One area where technology has made a significant impact is tax compliance.The use of information technology, such as e-filling and online services, has been found to have a significant effect on taxpayer compliance.Furthermore, taxpayers with knowledge of tax regulations are more likely to comply with their tax obligations (Tualeka et al., 2021).Tax compliance refers to how taxpayers adhere to tax laws and fulfill their tax obligations.Using technology in tax compliance can help facilitate the process for taxpayers and increase their awareness of tax regulations.Using online tax management systems, taxpayers can easily register, report their taxes, and make payments (Machfuzhoh & Pratiwi, 2021).Additionally, the use of technology can also enhance financial administration order, which in turn positively affects tax compliance (Tualeka et al., 2021).Overall, incorporating technology in tax compliance can improve taxpayer compliance rates, increase government revenue, and enhance the quality of public services.
Furthermore, while the utilization of technology in tax compliance holds promise for enhancing transparency and efficiency, its effectiveness may be undermined by persistent issues such as tax corruption, which erodes trust in the taxation system and discourages compliance among MSME entrepreneurs in Indonesia.The presence of tax corruption creates a negative perception among MSMEs entrepreneurs regarding the benefits of complying with tax obligations, leading to a decrease in tax compliance among MSMEs in Indonesia (Yuniarta & Purnamawati, 2020).This is due to the belief that paying taxes does not contribute to their business growth or benefit society, thus pushing them towards tax evasion or negligence (Susanto et al., 2020).In addition, the lack of government transparency and instances of criminal cases related to taxation further contribute to the distrust and suspicion among taxpayers (Hanum et al., 2020).For example, Gayus Tambunan, a Class III A tax official, came into the public spotlight in 2010 due to a shocking tax corruption case.He was convicted of various offenses, including tax manipulation of PT Surya Alam Tunggal Sidoarjo, accepting bribes from businessmen to manipulate taxes, hiding fantastic amounts of wealth, and forging passports and fleeing to Singapore.
Furthermore, the tax system's complexity and limited understanding of tax obligations among MSME entrepreneurs exacerbate the issue, making it more challenging to navigate the tax system and fulfil their obligations (Wijayanti et al., 2020).Therefore, addressing tax corruption and improving transparency in the taxation system are crucial steps towards promoting tax compliance among MSME entrepreneurs in Indonesia.While it is true that tax corruption can indeed pose challenges to tax compliance among small and medium-sized enterprises in Indonesia, it is essential to consider the broader context.Some may argue that tax compliance among MSME entrepreneurs is not solely influenced by tax corruption but by economic conditions, business capabilities, and individual ethical considerations (Inasius, 2019).
The increasing number of MSME players in Indonesia allows the government to increase tax revenue.However, this effort is complex because many MSME players do not understand the tax mechanism and feel burdened by the high tax burden (Negara & Purnamasari, 2018).In addition, tax penalties or sanctions also significantly impact the level of tax compliance of MSME actors in Indonesia (Sudarno et al., 2021).Tax sanctions applied to non-compliant MSME actors can be fines or block access to banking facilities or public services.Research conducted on MSME actors in Indonesia found that the existence of tax sanctions significantly influences tax compliance (Sinaga, 2017;Yaqin & Alwiyah, 2020).MSMEs that are aware of the consequences of tax violations, such as fines or blocking access, tend to be more compliant in fulfilling their tax obligations.In addition, tax knowledge also plays an essential role in the level of tax compliance of MSME actors (Susanto et al., 2020).
However, other studies have also argued that using tax penalties to improve tax compliance of MSME players can have counterproductive effects.Imposing tax penalties, such as fines or blocking access to banking facilities, may worsen the financial condition of MSME players who may already be in financial distress.As a result, this may result in a decrease in the ability of MSME actors to continue their businesses and ultimately impact overall economic growth (Indrawan et al., 2020;Pope & Abdul-Jabbar, 2008;Rahmawani & Hasanah, 2023;Sutanto & Febrianti, 2022).
In addition, the use of tax penalties can also create uncertainty and fear among MSMEs actors.They may have difficulty understanding complex tax rules, and the threat of tax penalties may create stress and uncertainty that negatively impact their business.As a result, MSME actors may tend to avoid tax obligations altogether rather than trying to comply with the rules of the fear of tax sanctions (Juniarti & Anggrahini, 2020;Oktaviani et al., 2017;Rosid et al., 2018).

LITERATURE REVIEW AND HYPOTHESES DEVELOPMENT Attribution Theory
Attribution theory attempts to explain how individuals attribute and underestimate the causes of their behavior (Kahneman et al., 1993).This theory focuses on how individuals cope with information about their own or others' behavior, and how they draw conclusions about the causes of that behavior.Attribution theory has a close relationship with tax compliance.Individuals who are compliant with taxes tend to make internal attributions for their compliant behavior, namely they assume that they are compliant because they have a strong internal desire to obey tax rules and obligations (Windaswari & Merkusiwati, 2018).Individuals who are not tax compliant may make external attributions, i.e. they consider that their non-compliant behavior is caused by external factors such as the difficulty of understanding tax regulations or the lack of supervision from the government (Yaqin & Alwiyah, 2020).In the context of tax compliance, internal attributions related to Intrinsic motivation to comply may encourage individuals to remain compliant with their tax obligations.

Micro, Small and Medium Enterprises
The Republic of Indonesia's Law No. 20/2008 on Micro, Small, and Medium Enterprises (MSMEs) precisely categorizes MSMEs into micro, small, and medium enterprises according to the scale of their business assets.A micro-enterprise is a business with assets totaling no more than IDR 50,000,000.The assets encompass all forms of capital owned by the firm, excluding the land and construction of the business premises.Micro firms are typically initiated by individuals or small groups with little financial resources.Micro enterprises encompass street sellers and small service businesses.
Small businesses have assets of more than IDR 50,000,000 (fifty million rupiah) to IDR 500,000,000 (five hundred million rupiah).Small enterprises are generally larger than micro enterprises and may have expanded their reach and operations.However, small businesses still have limited resources and are often run by sole proprietors or small groups.
Medium-sized enterprises have assets of more than IDR 500,000,000,-(five hundred million rupiah) to IDR 10,000,000,000,-(ten billion rupiah).Medium-sized enterprises tend to be larger and more complex, perhaps with a more formal organizational structure and extensive operations.They usually have more employees and are often involved in medium-scale production or broader marketing of products.
This definition assists the government and relevant agencies in identifying, supporting and providing assistance to MSME actors according to the needs and potential of each category.This is important in economic development as the MSME sector is essential in economic growth, job creation, and income distribution.

Tax Knowledge and Tax Compliance
One of the critical factors contributing to the success of tax compliance among Micro, Small, and Medium Enterprises in Indonesia is the taxpayers' knowledge (Juniarti & Anggrahini, 2020).When MSME owners understand their tax obligations and the importance of paying taxes, they are more likely to comply with tax regulations (Sari et al., 2021).This knowledge includes knowing the types of taxes that need to be paid, the deadlines for tax payments, and the proper procedures for tax reporting (Meidawati & Azmi, 2019).Additionally, knowledge of tax benefits and incentives available to MSME owners can encourage tax compliance (Harjanto et al., 2020).
Furthermore, knowing the consequences of non-compliance, such as penalties and legal actions, can also serve as a deterrent and motivate MSME owners to fulfil their tax obligations (Dularif & Rustiarini, 2022).This knowledge acts as a guiding force, helping MSME owners navigate the complex tax system and enabling them to fulfil their responsibilities as responsible citizens (Subroto, 2020).This knowledge makes MSME owners more likely to maintain accurate records, report their income honestly, and pay their taxes on time.This ultimately contributes to the overall tax compliance of MSME owners, aiding in revenue generation for the government and supporting the country's development.
MSME owners who understand the types of taxes to be paid, payment deadlines, and tax reporting procedures tend to associate tax obligations with positive impacts, such as contributions to the country's development and responsibilities as good citizens.Knowledge of tax benefits and incentives also reinforces positive perceptions of tax obligations.Conversely, a lack of understanding of the consequences of tax non-compliance, such as sanctions and legal action, may lead MSME owners to ignore tax obligations.Therefore, this understanding of attribution theory helps explain how knowledge about taxes affects MSME tax compliance in Indonesia, which impacts government revenue and state development.H1: there is a significant positive effect of tax knowledge on tax compliance

Tax Penalty and Tax Compliance
Enforcing tax legislation and applying penalties are essential for encouraging tax compliance among Micro, Small, and Medium Enterprises in Indonesia.Demonstrates that comprehension of new legislation and fines has a beneficial impact on tax compliance in MSMEs (Basri et al., 2021;Harjanto et al., 2020).The understanding of taxation regulations and the potential consequences of noncompliance, including tax sanctions, positively impact the tax compliance behavior of MSMEs.These factors increase awareness and knowledge among MSMEs regarding their tax obligations and the penalties they may face if they fail to comply (Kurniawan & Daito, 2021;Susanto et al., 2020).
Moreover, research indicates that a lack of understanding and awareness regarding tax obligations and sanctions can lead to non-compliance or tax evasion among MSMEs.Tax sanctions serve as a deterrent, emphasizing the importance of complying with tax regulations (Sudarno et al., 2021).Tax penalties are a disincentive to ensure taxpayers do not break the rules.However, it is crucial to ensure that tax sanctions are consistently enforced and applied fairly to maintain taxpayers' trust in the system.Furthermore, it is essential to address any perception of unfairness or inconsistency in applying tax sanctions (Meidawati & Azmi, 2019;Puspitasari, 2019).
An understanding of tax laws and sanctions also increases MSME owners' awareness and knowledge of tax obligations and the consequences of non-compliance.Conversely, a lack of understanding and awareness of tax obligations and sanctions may lead to non-compliance or tax avoidance among MSMEs.Therefore, an understanding of attribution theory helps explain how the enforcement of tax laws and the application of sanctions affect tax compliance behavior among MSMEs, as well as the importance of maintaining fairness and consistency in tax law enforcement.H2: there is a significant positive effect of tax penalties on tax compliance

Tax Corruption and Tax Compliance
The effect of tax corruption on the tax compliance of MSME players in Indonesia is a very complex and significant issue.For several reasons, tax corruption in Indonesia can hinder the growth and development of MSMEs.First, tax corruption creates uncertainty and injustice in the tax system, benefiting large corporations more than MSME actors (Indriana, 2019;Kusnadi, 2020).Second, tax corruption can result in heavier tax burdens for MSME actors than for large corporations, as they are often subject to extortion and bribe requests from individuals responsible for taxes (Kurniawan & Daito, 2021).Third, tax corruption can also reduce the trust and confidence of MSME actors in the government and the tax system, so they tend to be reluctant to pay taxes obediently (Saputri & Kamil, 2021).
These factors contribute to a lower tax compliance rate among MSMEs, resulting in a loss of potential tax revenue for the government.Furthermore, corruption in the tax system creates a sense of unfairness and injustice among MSMEs (Al-Hadi et al., 2022).They may feel that their hard-earned money is being unfairly taken from them, while large corporations can evade taxes through corruption (Hermanto et al., 2022;Susanto et al., 2020).This perception can further erode MSMES' willingness to comply with tax obligations.Therefore, the Indonesian government must address and combat tax corruption effectively by implementing measures to enhance transparency, accountability, and integrity in the tax system.
Micro, Small and Medium Enterprise (MSME) who see consistent and fair application of tax laws and sanctions are likely to believe that tax compliance brings positive outcomes, such as avoiding sanctions or other negative consequences.They may consider fulfilling tax obligations as an important action to maintain business reputation and avoid legal problems.However, if individuals feel that the application of tax laws is not consistent or fair, they may blame external factors such as an inadequate tax system or gaps in law enforcement.Thus, attribution theory explains how individuals' perceptions of cause and effect affect their motivation to comply with tax obligations, as well as its practical implications in improving tax compliance among MSMEs.H3: there is a significant negative effect of tax corruption on tax compliance

Information Technology Utilization, Tax Knowledge and Tax Compliance
The Indonesian government is actively working to mitigate the impact of tax knowledge on tax compliance among Micro, Small, and Medium Enterprises (MSMEs) in Indonesia.One strategy employed is the utilization of information technology.(Fuadi et al., 2021).Information technology has a vital role in moderating the effect of tax knowledge on tax compliance in MSMEs in Indonesia (Yusuf, 2021).Through information technology, MSMEs can more easily access information related to tax regulations, tax obligations, and procedures and processes for filing and paying taxes (Novianti & Amin, 2021).
In addition, information technology can also assist in more efficient tax management and administration.With information technology, MSMEs can use special software or applications that make it easier for them to calculate and report their taxes and remind them of tax payment deadlines (Faizal et al., 2021).Thus, information technology can increase the understanding and awareness of MSME actors' tax obligations, reducing potential errors or omissions in tax calculation and reporting (Ersania & Merkusiwati, 2018).
Information technology can also facilitate communication and collaboration between MSME actors and government parties related to taxation, making it easier to consult and get help if needed (Tualeka et al., 2021;Liu et al., 2012).Thus, it can be concluded that information technology has a significant role in moderating the effect of tax knowledge on tax compliance among MSME players in Indonesia.H4: information technology utilization significantly moderates the effect of tax knowledge on tax compliance

METHODS
This study employs a quantitative technique within the realm of survey research.A questionnaire was utilized to collect data from 200 MSMEs in Jakarta.The sample approach employed was non-probability using convenience sampling.The data analysis method use Structural Equation Modeling-Partial Least Squares (SEM-PLS) to assess both the outer and inner models for testing the measurement tools and research hypotheses.Utilizing SMART-PLS 3.3.3software for data processing and analysis.
Measurement of variables tax knowledge, tax penalty, tax corruption, information technology utilization and tax compliance adopted from previous research as in Table 1.

RESULTS AND DISCUSSION
Figure 1 and Table 2 show the results of the outer model analysis consisting of convergent validity, discriminant and reliability.The results show that all loading factor values are greater than 0.7, meaning that the indicators strongly correlate to the construct or exogenous and endogenous variables so that the measurement indicators can explain the construct.In addition, table 2 shows the results of testing the average variance extracted (AVE) value greater than 0.5, meaning that the variance of the indicators used to measure a construct can reflect the variance of the construct so that it can be concluded that convergent validity can be fulfilled.
Table 2 also presents the reliability test result with Cronbach alpha and composite reliability parameters.The reliability test shows that all Cronbach alpha and composite reliability values of each variable are more significant than 0.7, so it can be said that the research instrument is reliable.3 is the result of goodness-of-fit testing using the SRMR parameter.A model can be considered fit if the SRMR value is smaller than 0.8 while the SRMR value in the range 0.8-1 model is still acceptable.The test results show that the SRMR value is 0.077, meaning this research model fits.4 shows the adjusted R-Square value of 0.687, meaning that tax knowledge, tax penalty, and tax corruption influence 68.7% of tax compliance, and the remaining 31.3% is influenced by other variables not examined in this study.This model category can also fall into the moderate category because it is more significant than 0.5.Table 5 shows each f-square value of exogenous variables on endogenous variables.Tax awareness on tax knowledge is 0.000, meaning that tax knowledge has no influence.Likewise, the fsquare values of tax penalty and tax corruption are 0.085 and 0.126, which weakly influence tax compliance because the f-square value is smaller than 0.15.

Hypothesis test
Based on Table 6, it can be concluded that tax knowledge has no significant effect on tax compliance because the p-value is more extensive than 0.05.So, hypothesis one is rejected.
Table 6 also shows a significant positive effect of the tax penalty on tax compliance because the p-values are smaller than 0.05, and the coefficient value is 0.258.So, hypothesis two is accepted.
Furthermore, the statistical results show a significant negative effect of tax corruption on tax compliance because the p-value is less than 0.05 and the coefficient value is -0.322.So, hypothesis three is accepted.
Meanwhile, the moderation test in Table 6 shows that the significance value of the interaction between the taxpayer trust variable and tax socialization on tax compliance is less than 0.05, so it can be concluded that information technology utilization significantly moderates the effect of tax knowledge on tax compliance.Figure 2 is also reinforced by testing using the simple slope analysis method, which shows that the +1 SD and -1 SD lines show the opposite direction, meaning that if the interaction value of taxpayer trust with tax socialization increases or decreases, it will affect tax compliance.The results show that tax knowledge has no significant effect on tax compliance.Tax compliance refers to taxpayers fulfilling their obligations by paying taxes accurately and on time.Tax knowledge may not significantly influence A compliance because compliance behavior is not solely determined by knowledge alone (Fauziyyah et al., 2020).Other factors, such as individual attitudes, beliefs, economic circumstances, and perceptions of fairness in the tax system, also play a crucial role in determining taxpayer compliance (Chandra et al., 2021).Additionally, the complexity of tax laws and regulations can make it challenging for individuals to understand and apply them thoroughly.
Furthermore, even if taxpayers have adequate tax knowledge, they may still choose to engage in non-compliant behavior due to various reasons such as financial constraints, perceived low audit risk, lack of enforcement measures, or even cultural norms (Sutanto & Febrianti, 2022).Therefore, while tax knowledge is essential and can contribute to tax compliance, it is not the only factor influencing taxpayer behavior.Another possible reason tax knowledge may not significantly influence t compliance is that individuals may lack the motivation to comply with tax regulations (Witte & Woodbury, 1973).They may not perceive compliance benefits or feel the tax system is unfair.Additionally, individuals may lack trust in the government's use of tax revenues or perceive corruption within the tax administration.Therefore, even if individuals know about tax regulations, they may still engage in non-compliant behavior due to these motivational factors (Inasius, 2019;Mikesell & Birskyte, 2007).

Tax Penalty and Tax Compliance
The results show a significant positive effect of tax penalties on tax compliance.Tax penalties refer to the fines or sanctions imposed on taxpayers who fail to comply with their tax obligations (Prawati et al., 2020).The imposition of tax penalties strongly motivates MSMEs to fulfill their tax obligations and maintain tax compliance (Awaliyah & Purwanti, 2018).There are several reasons why tax penalties significantly positively influence tax compliance among UMKM in Indonesia (Harjanto et al., 2020).Firstly, tax penalties act as a deterrent for MSMEs to engage in tax evasion or noncompliance.Knowing that they will face financial penalties if they fail to comply with tax regulations, MSMEs are more likely to ensure that they accurately report their income and fulfill their tax obligations.Secondly, imposing tax penalties creates a sense of accountability among MSMEs.They understand that their actions have consequences and are more likely to take their tax obligations seriously.Thirdly, tax penalties serve as a form of education for UMKM regarding their tax obligations.When MSMEs receive tax penalties, they know their mistakes and the consequences of noncompliance.This can lead to a greater understanding and awareness of their tax obligations, prompting UMKM to take the necessary steps to ensure future compliance.
Additionally, tax penalties not only influence individual UMKM but also create a ripple effect on Indonesia's overall tax compliance culture.When UMKM witness their peers facing tax penalties, they are more likely to understand the seriousness of tax compliance and adhere to tax regulations themselves (Abdurrosid et al., 2021;Irawan & Khoirunurrofik, 2021;Juniarti & Anggrahini, 2020).Furthermore, imposing tax penalties helps maintain a level playing field among UMKM.Those UMKM who comply with their tax obligations are not at a disadvantage compared to those who engage in tax evasion.

Tax Corruption and Tax Compliance
The results show a significant negative effect of tax penalties on tax compliance.Tax corruption negatively affects tax compliance among MSMEs in Indonesia for several reasons.Firstly, tax corruption erodes trust and confidence in the tax system.When UMKM see that tax officials are engaging in corrupt practices, it creates a perception that the system is unfair and biased (Becchetti et al., 2021;Yohou, 2023).This perception undermines UMKM's willingness to comply with tax obligations, as they may believe that their taxes will not be used effectively for public services but rather for personal gain through corrupt practices (Awaliyah & Purwanti, 2018).Secondly, tax corruption creates a culture of non-compliance and impunity.When UMKM witnesses tax officials engaging in corrupt practices without facing any consequences, it sends a message that noncompliance and evasion are tolerated.As a result, UMKM may feel justified in evading taxes themselves, believing they can get away with it.Thirdly, tax corruption creates a burden on UMKM.These businesses already face numerous challenges, such as limited resources and access to capital.Tax corruption adds a burden by requiring UMKM to engage in corrupt practices or pay bribes to navigate the tax system and avoid penalties (Obaid & Udin, 2020).

Information Technology Utilization, Tax Knowledge and Tax Compliance
The results show that Information Technology Utilization significantly moderates the effect of tax knowledge on tax compliance.Tax compliance is not always guaranteed, as taxpayers may intentionally or unintentionally fail to meet their tax obligations (Subadriyah & Harto, 2021;Tualeka et al., 2021).One factor that can potentially influence tax compliance is tax knowledge.Tax knowledge refers to an individual's understanding of tax regulations, rates, and benefits.Research has shown that individuals with a higher level of tax knowledge are more likely to comply with their tax obligations.However, the level of tax knowledge alone may not be sufficient to guarantee tax compliance.This is where the utilization of information technology comes into play as a significant moderating factor (Dewi & Supadmi, 2019).Information technology, such as the use of tax e-systems and digital platforms, can significantly enhance tax compliance by providing taxpayers with easy access to accurate and up-to-date information about tax regulations and obligations (Liu et al., 2012;Tualeka et al., 2021;Wulandari & Dasman, 2023).By utilizing information technology, taxpayers can better understand their tax responsibilities and the consequences of non-compliance.Furthermore, information technology can streamline tax processes, making it easier for taxpayers to fulfill their obligations.

CONCLUSION AND RECOMMENDATION
The study found that tax knowledge has no significant effect on tax compliance, while tax penalties and tax corruption significantly affect tax compliance.Other factors, such as individual motivation, perceived fairness of the tax system, and trust in the government, also play a role in determining tax compliance.Information technology also moderates the effect of tax knowledge on tax compliance.
This research provides an essential theoretical impact in understanding tax compliance behavior among MSMEs.The finding that tax knowledge is insignificant in influencing tax compliance highlights the complexity of factors influencing tax behavior.This emphasizes the importance of adopting a holistic approach in analyzing tax compliance, which involves an in-depth understanding of the psychological, economic, social, and cultural factors that influence the individual and organizational behavior in the context of taxation.
In addition, these findings highlight that in designing policies and strategies to improve tax compliance among MSMEs, not only the improvement of tax knowledge should be considered.Instead, the government and relevant agencies need to consider various other factors, such as individual motivation, perceived fairness of the tax system, trust in the government, and the effectiveness of law enforcement and enforcement of tax rules.Therefore, in developing practical policy approaches, integration and coordination between various disciplines, including economics, psychology, sociology, and political science, are required better to understand the dynamics of tax compliance among MSMEs.
The findings also show that using information technology can moderate the effect of tax knowledge on tax compliance.This highlights the critical potential of information technology in improving tax understanding and awareness among MSMEs and providing more straightforward and efficient access to tax-related information.Therefore, in designing tax education programs and tax services, the government can leverage information technology to improve the effectiveness and efficiency of these programs and expand their reach and accessibility to all MSMEs in Indonesia.
Practically, the government and relevant agencies need to consider practical strategies to improve tax compliance among MSMEs, including stricter enforcement of tax penalties and more intensive tax education programs through information technology.Increased transparency and accountability in tax administration are also needed to reduce tax corruption and build public trust in the tax system.

Table 1 . Measurement of Variable
Source: Data processed, 2024