THE EFFECT OF TAX UNDERSTANDING AND AWARENESS ON MSME TAX COMPLIANCE

Abstrak

This study investigates the effect of tax understanding and taxpayer awareness on compliance with Final Income Tax among Micro, Small, and Medium Enterprises (MSMEs) in Padang Panjang, Indonesia. The research applies a quantitative method using primary data obtained from 41 MSME taxpayers and analyzed using Structural Equation Modeling–Partial Least Squares (SEM-PLS). The results reveal that tax understanding has a statistically significant positive effect on tax compliance, indicating that higher levels of technical knowledge substantially improve compliance behavior. Conversely, taxpayer awareness does not show a significant influence, suggesting that awareness alone does not necessarily translate into compliant actions. The coefficient of determination (R²) of 0.67 demonstrates that the model explains a considerable proportion of compliance variability. These findings emphasize the importance of strengthening practical tax literacy rather than relying exclusively on normative awareness campaigns.