Taxpayer Compliance: Examining the Effect of the Administration System and Digital Tax Literacy

This study aimed to examine the effects of digital tax literacy and the Coretax administration system on tax compliance among micro, small, and medium enterprise (MSME) taxpayers in Bandung City, West Java, Indonesia. Using a quantitative explanatory research design with variance-based structural equation modeling, data were collected through structured questionnaires from 129 MSME taxpayers selected through purposive sampling. The results indicate that digital tax literacy has a positive and significant effect on tax compliance, with a coefficient value of 0.610 and a probability value of 0.000. Taxpayers with higher digital literacy can calculate, remit, and report their taxes independently, reducing cost and time barriers and minimizing risks such as data entry errors and late reporting. In contrast, the Coretax administration system does not significantly affect tax compliance, with a coefficient value of 0.119 and a probability value of 0.170. The majority of respondents had limited experience with Coretax, with 43.41% having less than six months of experience, and the system is perceived as complex by taxpayers unfamiliar with technology. The model explains 50.1% of the variance in tax compliance, while the remaining 49.9% is explained by factors outside the model. These findings suggest that tax compliance among MSME taxpayers is primarily driven by digital tax literacy rather than by the digital administration system. The practical implication is that the Directorate General of Taxes should enhance digital tax literacy programs and ensure the Coretax system is free of technical issues to improve taxpayer compliance.