The impact of perceptions of corruption upon intentional non-compliance behaviour of personal income taxpayers: Indonesian perspective

Perceptions of corruption and taxation non-compliance behaviour are key challenges to state-building in developing economies. Research into these areas, and knowledge of the relationship between them is, however, somewhat limited. This thesis addresses an identified knowledge gap about whether, and precisely how, perceptions of corruption may affect Indonesian personal income taxpayers’ compliance behaviour. It specifically examines how five different forms of perceived corruption may impact upon intentional tax underreporting behaviour by applying the theory of planned behaviour.Using a conceptual framework to derive the various research questions and testable hypotheses, this study employed a sequential mixed-methods approach. Initially, a qualitative phase involved conducting semi-structured, in-depth interviews with nine participants (three taxpayers, three tax agents, and three tax officers). The second, and core, phase of the research involved extensive data collection using a mixed-modes field survey conducted at 12 tax offices across four Indonesian regions. A total of 397 experienced taxpayers were surveyed, comprising 196 self-employed and 201 employed individuals.Three principal findings have emerged from the study. First, the data from both the qualitative and quantitative phases indicate that high levels of perceived corruption and non-compliant tax behaviour exist in Indonesia. Second, the quantitative findings clearly suggest that perceptions of corruption undermine taxpayers’ intention to report their income accurately by influencing attitudes and perceived social norms towards tax compliance. Third, the findings ultimately demonstrate that high levels of perceived general corruption (i.e. abuse of power by public officials for private gain), grand corruption (i.e. involving high-level public officials), and grand tax corruption (i.e. corruption involving high-level tax officials) influence intentional tax underreporting behaviour.The results support the notion that perceptions of corruption are an important external operating context and adversely affect tax compliance behaviour. The findings are then placed in a specific context of compliance risk management to identify strategies to improve tax compliance and explore the steps necessary to implement them effectively. It sheds some light on the applicability of the traditional responsive regulatory approach utilised by the Indonesian revenue authority, which adopts various measures to achieve either voluntary or enforced compliance, particularly in dealing with intentionally non-compliant personal taxpayers