Trust, power and religiosity in Indonesian micro small and medium sized enterprises tax compliance

Abstract

This study examines tax compliance among Indonesian Micro, Small, and Medium Enterprises (MSMEs) due to their crucial role as recipients of government revenue using the Slippery Slope Framework (SSF), which focuses on the role of trust, power, and religiosity (karma phala) in shaping taxpayer behavior. A survey of 145 MSME taxpayers in Bali and 121 taxpayers in Malang-Surabaya was conducted, and data were analyzed using Structural Equation Modeling-Partial Least Squares (SEM-PLS). The study findings reveal that trust and power significantly influence tax compliance, with karma phala strengthening this relationship. In addition, tax compliance rates are higher in Bali than in Malang-Surabaya, indicating the influence of cultural and religious factors. By integrating karma phala as a moderating variable, this study extends the SSF and underscores the importance of trust-based and enforcement-based approaches in driving compliance. These insights highlight the need for tax policies that combine transparency, consistent enforcement, and cultural considerations to improve compliance among MSMEs.