Tax awareness, tax knowledge, and tax socialization significantly influence tax compliance among Micro, Small, and Medium Enterprises (MSMEs) in Ponorogo Regency, East Java, according to a study conducted by Sandhy Yudha Hafidhin and Agung Listiadi from Universitas Negeri Surabaya. Published in 2026 in the International Journal of Management Analytics (IJMA), the research highlights the continuing challenge of low tax compliance among MSMEs despite the sector’s critical contribution to Indonesia’s economy.
The study explains that MSMEs are one of the main pillars of Indonesia’s national economy. In 2021, Indonesia had approximately 64.2 million MSMEs contributing more than 61 percent of the country’s Gross Domestic Product (GDP), equivalent to around IDR 8,573 trillion. Beyond supporting local economic growth, MSMEs also play an important role in generating state revenue through taxation.
However, the level of tax compliance among MSMEs remains relatively low. Data from the Department of Trade, Cooperatives, and MSMEs of Ponorogo Regency showed that the number of MSME taxpayers failing to pay taxes continued to increase over the past four years. In 2021, out of 38,387 registered MSME taxpayers, only 4,775 paid taxes, while 33,612 were recorded as non-compliant taxpayers.
The research notes that the Indonesian government has introduced several tax reforms to encourage MSME compliance. One of the most significant measures was the reduction of the MSME income tax rate from 1 percent to 0.5 percent under Government Regulation No. 23 of 2018. Furthermore, under the 2021 Tax Harmonization Law (UU HPP), MSMEs with annual revenue below IDR 500 million are exempt from final income tax obligations.
Despite these tax incentives, lower tax rates alone have not been sufficient to significantly improve taxpayer compliance among MSMEs. Researchers argue that social and behavioral factors continue to strongly influence business owners’ willingness to fulfill their tax obligations consistently.
The study used a quantitative approach by distributing questionnaires to 100 MSME taxpayers in Ponorogo selected through a cluster random sampling method. Data were analyzed using multiple linear regression with IBM SPSS Statistics 25 software.
Researchers examined four major factors believed to influence MSME tax compliance:
- taxpayer awareness,
- tax knowledge,
- tax rates,
- and tax socialization programs.
The findings revealed that all variables simultaneously influenced MSME taxpayer compliance. However, when analyzed individually, only taxpayer awareness, tax knowledge, and tax socialization showed significant effects on compliance behavior. Tax rates, meanwhile, were found to have no significant influence on MSME taxpayer compliance in Ponorogo.
The research identified taxpayer awareness as one of the most important factors affecting compliance. MSME owners who understand the importance of taxes for national development tend to show higher compliance in fulfilling their tax obligations. This awareness is not only related to technical tax regulations but also to a broader sense of responsibility toward public development and state financing.
Tax knowledge was also found to play a major role. Business owners who understand tax procedures, payment deadlines, reporting systems, and applicable tax regulations are generally more capable of complying with tax obligations than those with limited tax literacy.
Another significant factor was tax socialization. According to the study, government-led tax education and information campaigns help improve public understanding of taxation rights and obligations. Effective tax socialization also reduces administrative errors and unintentional violations among taxpayers.
In contrast, tax rates themselves were not found to significantly affect compliance levels. Researchers suggest that post-pandemic economic conditions may explain this result, as many MSMEs experienced declining revenues or ceased operations entirely, making tax rate reductions less relevant to their decision-making process.
Regression analysis showed that taxpayer awareness had a positive coefficient of 0.267, while tax socialization had the strongest influence with a coefficient of 0.344. The study also reported an R Square value of 0.183, indicating that 18.3 percent of taxpayer compliance variation could be explained by the four variables examined in the study.
Based on these findings, the researchers recommend that Indonesia’s Directorate General of Taxes intensify tax socialization programs specifically targeting MSMEs in regional areas. They also emphasize the importance of stronger coordination between tax authorities and local MSME agencies to improve taxpayer data accuracy and strengthen tax administration systems.
The study highlights that improving MSME tax compliance requires more than low tax rates alone. Sustainable taxpayer education, stronger tax literacy, and broader public awareness are considered essential for building long-term voluntary tax compliance among small business owners.
Author Profiles
- Sandhy Yudha Hafidhin - Universitas Negeri Surabaya
- Agung Listiadi - Universitas Negeri Surabaya
Research Source
Hafidhin, S.Y., & Listiadi, A. (2026). The Influence of Awareness, Tax Knowledge, Tax Rates, and Tax Socialization on the Compliance of MSMEs Taxpayers in Ponorogo Regency. International Journal of Management Analytics (IJMA), Vol. 4 No. 2, 259–274.
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