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PhD Defence Abdul Rahman

tax compliance in Indonesia: the role of public officials as taxpayers

This thesis addresses the problem of low tax compliance in Indonesia, focusing on the role of public officials as taxpayers. Through the analysis of literature and policy documents, we identified four main factors affecting tax compliance: modernized tax administration system (MTAS), tax sanctions, tax services, and tax morale. Subsequently, we focused on the role of public officials. In the scope of Indonesia’s laws and social system, public officials are viewed as representatives of government and as role models (“father-figures”) and change agents. We found that to date no research has been done on tax compliance by public officials specifically.

In the first step, we conducted a survey study among 400 respondents working in the public sector (as government or state enterprise employees). We found that public officials perceive their tax compliance as good, even though they behave far from perfect. The perception of public officials of MTAS and tax services was sufficient, but the use of tax sanctions and tax morale was perceived as bad. In terms of correlations, we found rather low (but significant) correlations with tax compliance for MTAS, tax services, and tax morale, but no significant correlation for tax sanctions. We found similar results when we looked specifically at government and state enterprise employees.

In its second (follow-up) step, the empirical research focused on two variables: tax sanctions and tax morale. It consisted of an on-line survey, in-depth face-to-face interviews, and a simulation game. We found that this model worked quite well, in terms of the model as a measurement model. However, as a structural (explanatory) model the captured effect was rather low, and further improvements and extensions are needed. The follow-up research also showed that rewards are potentially more effective in increasing tax compliance than punishment.

We recommend the proper use of tax revenues, providing regular and transparent information, and the strong commitment of the Indonesian government in their implementations. For further research, we suggest exploring potential additional underlying factors for tax compliance, clarifying differences in tax compliance between government employees, state enterprise employees and private workers, and investigating the potential difference between the use of rewards and punishment in raising tax compliance.