Year
2025
Abstract
Tax evasion is still a significant challenge for Indonesia's state revenue. This study examines how Hofstede's cultural dimension affects the ethical perception of tax evasion in Javanese MSME owners to overcome the gap in understanding of cultural factors that affect tax compliance behaviour at the individual level. In the context of a tax reporting system that has been fully digitised through e-filing and online applications, it is important to understand that the existence of technology does not necessarily remove the moral rationale for fraudulent acts. A quantitative survey was conducted on 112 MSME owners. Using validated instruments, the study used purposive sampling and measured six dimensions of Hofstede's culture (power distance, individualism, masculinity, uncertainty avoidance, long-term orientation, and indulgence) and ethical perceptions of tax evasion. Multiple regression analysis was used to test the hypothesis, and validity and reliability were confirmed through pilot tests. Two of the six hypotheses are supported. Power distance showed a significant negative influence on the ethical perception of tax evasion, while indulgence showed a significant positive influence. Individualism, masculinity, uncertainty avoidance, and long-term orientation did not show a significant relationship. High power distance reduces the justification of tax evasion through increased respect for government authority, while high indulgence increases the acceptance of tax evasion to satisfy personal desires. These findings suggest that cultural interventions that focus on respect for authority and self-control can improve the tax compliance of MSME owners in Indonesia, even in the era of fully digital-based tax reporting.
Keywords:
Hofstede culture; tax evasion; ethical perception; MSMEs; Power Distance
Recommended Citation
Magdalena, Renna and Cheirine, Henny, "Cultural Dimensions and Ethical Perceptions of Tax Evasion in The Digital Tax Reporting Era" (2026). International Conference on Business and Management Research (ICBMR). 33.
https://scholarhub.ui.ac.id/icbmr/2025/1/33
Included in
Cultural Dimensions and Ethical Perceptions of Tax Evasion in The Digital Tax Reporting Era
Tax evasion is still a significant challenge for Indonesia's state revenue. This study examines how Hofstede's cultural dimension affects the ethical perception of tax evasion in Javanese MSME owners to overcome the gap in understanding of cultural factors that affect tax compliance behaviour at the individual level. In the context of a tax reporting system that has been fully digitised through e-filing and online applications, it is important to understand that the existence of technology does not necessarily remove the moral rationale for fraudulent acts. A quantitative survey was conducted on 112 MSME owners. Using validated instruments, the study used purposive sampling and measured six dimensions of Hofstede's culture (power distance, individualism, masculinity, uncertainty avoidance, long-term orientation, and indulgence) and ethical perceptions of tax evasion. Multiple regression analysis was used to test the hypothesis, and validity and reliability were confirmed through pilot tests. Two of the six hypotheses are supported. Power distance showed a significant negative influence on the ethical perception of tax evasion, while indulgence showed a significant positive influence. Individualism, masculinity, uncertainty avoidance, and long-term orientation did not show a significant relationship. High power distance reduces the justification of tax evasion through increased respect for government authority, while high indulgence increases the acceptance of tax evasion to satisfy personal desires. These findings suggest that cultural interventions that focus on respect for authority and self-control can improve the tax compliance of MSME owners in Indonesia, even in the era of fully digital-based tax reporting.