BETWEEN POWER AND TRUST: MINIMIZING LOCAL TAX EVASION THROUGH THE SLIPPERY SLOPE FRAMEWORK APPROACH

Muhammad Erpan, Rr. Titiek Herwanti, Lilik Handajani

Abstract


The tax evasion is global phenomenon experienced by different countries, either Local Government in Indonesia. This research present the Slippery Slope Framework to built a model that integrate power and trust to explain how they impact on tax evasion in the context of local tax in West Lombok Regency. The research model estimation uses the Partial Least Squares (PLS) approach and applies Finite Mixture PLS Path Modeling (FIMIX-PLS) method to uncover unobserved heterogeneity by segmenting the sample, thus applies PLS Multi-group Analysis (PLS-MGA) to identifies difference within segment and finally PLS ImportancePerformance Map Analysis (PLS-IPMA) which in turn can lead managerial actions of tax authority to achieve lower tax evasion. The research finding show that the main difference characterizing the two uncovered heterogeneity taxpayer segment that lies in the government tax of hotel, restaurant and entertainment services as a local tax in the city/regency. The major segment represented tax payer that are fairly voluntary compliance while the other smallest segment are more compliance voluntarily. Thus, the power of authorities has a small negative impact on tax evasion for the first segment but positive impact for second segment. Conversely, the trust in authorities has a negative impact on tax evasion in both segment by stronger effect for the second segment. An Importance-Performance Map Analysis (IPMA) illustrated substantial differences across these segment and provides supportive multiple strategies for tax authorities regarding the effort to minimize tax evasion. Finally, our study underlines the need to revealed unobserved heterogeneity among taxpayer population and the need to reconsider reporting in future academic research on taxpayer compliance.

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