Internal and External Determinants of Tax Morale of MSME Actors: A Contemporary Empirical Study

Abstract

This study aims to analyze the influence of internal and external factors on the tax morale of Micro, Small, and Medium Enterprises (MSMEs) in Bengkalis Island. The examined variables include trust in government, trust in tax administration, nationalism, perceived probability of being caught, severity of punishment, and tax literacy. A quantitative approach was employed using Structural Equation Modeling based on Partial Least Squares (SEM-PLS). Data were collected through questionnaires distributed to MSME taxpayers, with a population of 9,452 and a sample determined using Slovin’s formula with a 10% margin of error. The results reveal that trust in government, nationalism, perceived probability of being caught, and severity of punishment have significant positive effects on tax morale. In contrast, trust in tax administration and tax literacy show no significant effect. These findings indicate that MSME taxpayers’ moral behavior is more influenced by social and institutional factors rather than cognitive factors. It is recommended that local governments enhance fiscal transparency, foster fiscal nationalism, and strengthen fair law enforcement to promote higher tax morale and compliance among MSMEs in island regions.