Linking Cognitive, Moral, and Motivational Factors to Tax Compliance: An MSME Study Based on Self-Determination Theory and the Extended Theory of Planned Behavior

Abstract

MSME tax compliance plays a strategic role in increasing state revenue, but the low level of compliance requires effective strategies based on internal and external factors of taxpayers. Previous studies tend to focus on sanctions or economic incentives and rarely integrate psychological factors from the Extended Theory of Planned Behavior with motivational factors from Self-Determination Theory to explain MSME tax compliance behavior. This study aims to develop an integrative model that examines the influence of Tax Knowledge, Tax Morale, Tax Fairness and Equity, and Tax Regulations on Tax Compliance through the mediation of Independence, Competence, and Tax Compliance Intention. Using a quantitative cross-sectional design approach to 534 MSME respondents and prospective entrepreneurs in Indonesia and analyzed using Partial Least Squares Structural Equation Modeling (PLS-SEM), the results show that all ETPB constructs have a significant effect on independence and competence, which in turn increases tax compliance intention and has a strong impact on actual compliance. Mediation analysis shows the existence of a multi-layered influence pathway from cognitive factors to compliance behavior through psychological capacity and intention, thus emphasizing the need for multi-layered policy interventions ranging from tax education, internalization of moral values, increasing perceptions of fairness, regulatory clarity, to empowering the independence and competence of MSMEs to build commitment to sustainable tax compliance.