THE ROLE OF DIGITAL TRANSACTIONS, TAX POLICY, AND CTAS IN SHAPING TAXPAYER COMPLIANCE: A CASE STUDY OF INDONESIAN SMES

Abstract

This study examines the impact of digital transactions, tax policy, and the Core Tax Administration System (CTAS) on taxpayer compliance among small and medium-sized enterprises (SMEs) in Indonesia's tourism sector. Data were collected from SMEs in the Yogyakarta Special Region (DIY) and Bali Province using a quantitative survey method. Structural equation modeling (SEM) was employed to analyze the relationships among digital transaction adoption, perceptions of tax policy, CTAS effectiveness, and tax compliance, while also exploring the moderating effect of the Love of Money behavior. The findings reveal that digital transactions alone do not guarantee higher tax compliance due to infrastructural gaps, educational challenges, and concerns over privacy and enforcement. Transparent and well-structured tax policies significantly enhance compliance, and the implementation of CTAS strengthens traceability, system efficiency, and taxpayer trust. Behavioral factors, particularly financial attitudes, influenced compliance motivations, highlighting the need for incentive-driven policies. This study contributes to understanding how digital innovation, behavioral economics, and tax policy intersect to influence SME tax compliance in emerging economies. The findings provide practical recommendations for policymakers to integrate digital systems with targeted incentives, enhance digital and tax literacy, and strengthen infrastructure, thereby fostering a more inclusive and compliant tax environment in Indonesia. This approach aims to cultivate a culture of compliance among SMEs and ultimately strengthen Indonesia's fiscal resilience.