Analysis of Tax Compliance among MSME’s in Malang City: Voluntary vs Enforced Tax Compliance Towards Smart Governance

Abstract

The objective of this study is to examine the impact of voluntary and enforced tax compliance strategies on tax compliance among individual and corporate taxpayers in MSMEs in Malang City from the perspective of Smart Governance. This research uses a qualitative methodology with interpretive paradigm that uses phenomenology technique. The data was obtained by conducting interviews with individual and corporate MSME’s taxpayers in Malang City. The result shows that voluntary and enforced tax compliance strategies had their own advantages and disadvantages. The enforced tax compliance can be running effectively only if the government had an absolute control over information circulating in society. Hence, the government must demonstrate a professional and competent attitude in tax matters so that the enforced tax compliance strategy will be effective. Reciprocally, in the voluntary tax compliance strategies, the government, particularly tax officers, must exhibit a high level of competency in the implementation of this policy in order to foster public trust, which will subsequently lead to automatic compliance with tax payments. Hence, the concept of intelligent governance is appropriate for both approaches as it promotes efficiency, proficiency, and transparency of information in the execution of government activities, include tax payments. This research uses qualitative approaches with phenomenology techniques. Therefore, to strengthen this research, quantitative re-evidence is needed using the SEM PLS MGA method so that the accuracy of the theory can be tested. The findings of this study are anticipated to serve as a benchmark for the advancement of Tax Compliance in MSMEs from the standpoint of the eSSF theory. If examined in relation to the economic development potential of MSMEs, particularly in terms of tax revenue, the findings of this study can serve as a valuable reference for the Directorate General of Taxes in implementing institutional changes towards Smart Governance. These reforms should aim to develop regulations that are pertinent to the revitalization of MSMEs in Malang City. This paper employs a phenomenological analytic approach to thoroughly investigate the comprehension and experiences of individual and corporate MSME taxpayers, in order to provide more comprehensive findings.