Digital Tax Administration and Its Impact on SMEs’ Tax Compliance Behavior

Abstract

The digital transformation of tax administration has become a strategic government initiative to enhance service efficiency and strengthen tax compliance, particularly among small and medium-sized enterprises (SMEs) that form the backbone of the national economy. Although the adoption of digital systems such as e-filing, e-billing, and e-invoicing has streamlined tax reporting and payment processes, their actual effectiveness in shaping SME compliance behavior remains an issue that requires deeper examination. This study aims to investigate the influence of digital tax administration on the tax compliance behavior of SMEs in Indonesia, while also identifying the enabling and constraining factors in its implementation. A descriptive–exploratory qualitative approach was employed, with data collected through in-depth interviews, non-participant observation, and analysis of documents related to digital tax policies. The findings reveal that the digitalization of tax administration contributes positively to formal compliance, particularly in terms of timely reporting, but has not yet fully translated into improved material compliance, namely accurate tax payments in accordance with regulations. Key determinants of successful implementation include digital literacy, system quality, and the availability of technical support from tax authorities. These results reinforce the Technology Acceptance Model and existing tax compliance literature by highlighting that perceived ease of use and perceived usefulness of technology play a critical role in shaping taxpayer compliance behavior.