Why Are MSMEs Reluctant to Interact with the "World" of Taxation?

Abstract

The aim to be achieved in this research is to find out and understand the reasons why MSMEs 
are reluctant to come into contact with the "world" of taxation, especially in fulfilling tax 
obligations, as well as knowing the perceptions and obstacles experienced by MSMEs. The 
methodology used is a qualitative approach with phenomenological methods to explore the 
meaning of individuals' subjective experiences regarding certain phenomena. The informants 
in this research were two MSME owners with a turnover below 500 million and two MSME 
owners with a turnover above 500 million and not exceeding 4.8 billion. The research location 
is in the city of Surabaya. Data was obtained through interviews with four informants selected 
according to certain criteria. Secondary data does not specify the data source to maintain the 
confidentiality of the institution providing data. The research results show that MSMEs face 
various challenges in carrying out tax obligations, starting from a lack of understanding of tax 
obligations, namely tax administration such as NPWP registration, the latest tax rate policies, 
submission of SPT, withholding of levies to technical obstacles, namely inadequate financial 
recording. Even though the 0.5% rate for MSMEs is considered low by some MSMEs, there is 
still a negative perception regarding the benefits received from paying taxes and some believe 
the rate is still high, which leads to distrust of the tax system.