Financial Literacy and Perceived Tax Digitalization as Joint Predictors of MSME Tax Compliance: Evidence from Central Java, Indonesia
DOI:
https://doi.org/10.35870/ijmsit.v6i2.8647Keywords:
Business Age, Central Java, Financial Literacy, MSME Tax Compliance, Perceived Tax DigitalizationAbstract
Micro, small, and medium enterprises (MSMEs) play an important role in emerging economies, yet limited administrative capacity may create challenges for tax compliance. This study examined the associations of Financial Literacy and Perceived Tax Digitalization with MSME Tax Compliance among MSME owners and managers in Central Java, Indonesia, while controlling for Business Age. A quantitative cross-sectional survey was conducted using online and paper-based questionnaires distributed through MSME associations, local business communities, and government-supported MSME networks. Of 300 questionnaires distributed, 250 complete and eligible responses were retained. Financial Literacy, Perceived Tax Digitalization, and MSME Tax Compliance were measured using seven, six, and seven items, respectively, on five-point Likert scales. Multiple linear regression was employed, with HC3 heteroskedasticity-consistent robust standard errors examined as a sensitivity analysis. Financial Literacy was positively associated with MSME Tax Compliance (β = .118, p = .007), while Perceived Tax Digitalization showed a stronger positive association (β = .760, p < .001). Business Age was not statistically significant (p = .815). The overall model was statistically significant, F (3, 246) = 188.744, p < .001, with R² = .697 and adjusted R² = .693. The findings indicate that Financial Literacy and user experiences with digital tax services are relevant dimensions of MSME Tax Compliance. The results support combining practical financial and tax capability-building with user-centred digital tax services that emphasise usability, efficiency, reliability, convenience, and security. Given the cross-sectional and purposive sampling design, the findings indicate associations rather than causal effects or population-wide estimates.
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