Interaction of T ax A wareness, Attitude, and E -Tax A doption in Improving Tax Compliance: A Study in Indonesia MSMEs

Purpose: This study examines how attitudes and adopting the electronic tax (e-tax) system influence tax compliance among micro, small, and medium enterprises (MSMEs) in Indonesia, specifically focusing on the moderating role of tax awareness. By identifying the psychological and behavioral factors contributing to tax compliance, the research seeks to provide insights that can help increase tax adherence among MSMEs. Design/methodology/approach: A quantitative survey was conducted from March to June 2024, gathering data from 178 MSMEs in Jakarta and Tangerang. Using validated questionnaires, the study measured participants' attitudes toward the e-tax system, adoption rates, and tax compliance levels. Tax awareness was a moderating variable to examine its impact on the relationship between attitudes, adoption, and compliance. Data analysis was performed using statistical methods to test the relationships between these variables. Findings: The findings reveal that a positive attitude towards the e-tax system significantly enhances both e-tax system adoption and tax compliance. Additionally, tax awareness was found to play a moderating role, strengthening the positive relationship between attitudes, adoption, and compliance. These results underscore the importance of tax awareness in fostering greater tax compliance among MSMEs and the effectiveness of e-tax systems as compliance tools. Research limitations/implications: This study is limited to MSMEs in the Jakarta and Tangerang regions, which may affect the generalizability of the findings to other regions in Indonesia. Future research could expand the sample geographically and explore additional variables, such as government incentives or technological literacy, that may further influence e-tax system adoption and compliance behavior. Originality/value: This study contributes to the literature on tax compliance by examining the unique context of Indonesian MSMEs, a critical sector for economic growth. It emphasizes the role of psychological and behavioral factors, such as attitudes and tax awareness, in promoting compliance, highlighting practical insights for policymakers and tax authorities. The findings can inform the design of targeted educational programs, training, and awareness campaigns to enhance MSME tax compliance, ultimately supporting national tax revenue and sustainable economic development.