Business Administration Practices and Their Contribution to Tax Compliance Among MSMEs: A Qualitative Study (Educoretax)

Summary

• MSMEs contribute more than 60% of Indonesia's GDP, yet in 2024 only 27.96% of non-employee individual taxpayers filed their annual income tax return.p.1
• The qualitative case study used semi-structured interviews with ten MSME informants in Jakarta Pusat from March to June 2026.p.1
• Three record-keeping patterns emerged: informal, semi-formal and digital.p.1
• Indonesia has around 66 million business units in 2023-2024, contributing more than 60% of GDP and absorbing up to 97% of the workforce.p.3
• Five of ten informants rely on manual recording, three use a mixed system and two have switched to digital.p.7
• Government Regulation 20 of 2026 keeps the 0.5% final income tax for individual MSME taxpayers and retains the IDR 500 million non-taxable turnover.p.10

Key insights

1. Informants using digital recording described greater consistency in tax reporting than those relying on informal methods.p.1
2. Limited basic accounting literacy and heavy operational workloads are the main barriers to compliance.p.1
3. Government assistance programs and access to formal financing act as effective motivational drivers.p.1
4. Government Regulation 20 of 2026 took effect on 22 April 2026, after tax year 2025 had ended.p.5
5. Final income tax is paid monthly, no later than the 15th of the following month, and reported in the annual return.p.5
6. Encouragement to apply for People's Business Credit (KUR) triggered one informant's awareness of orderly business administration.p.8
7. Tax compliance is a matter of capability and not only intention.p.9
8. The study recommends basic bookkeeping training integrated with tax education before pushing digital tax systems.p.10