Encourage Voluntary Compliance of MSMEs: BDO Tax Partners in Indonesia Emphasize the Importance of Balance between Trust and Regulation

JAKARTA - Micro, Small and Medium Enterprises (MSMEs) continue to strengthen their position as the backbone of the national economy. Based on data for 2025, this sector contributes significantly to 61.07 percent of Indonesia's Gross Domestic Product (GDP) or equivalent to IDR 8,573.89 trillion (KPPN, 2025). Although it absorbs 97 percent of the total workforce, the tax revenue contribution from this sector is still considered not optimal.

IGA Erna Dwi S, Tax Partner BDO in Indonesia, highlighted the inequality between the economic role of MSMEs and the realization of their tax revenue. Data shows that even though the MSMEs economy is growing rapidly, the final tax revenue of MSMEs in 2025 only reaches IDR 13.5 trillion, a very small figure compared to the total National Tax revenue which reaches IDR 1,209 trillion.

"This condition creates a challenge for tax authorities to carry out an extension. However, we must understand that for micro and small business actors, the obligation to keep full accounting standards is often a very high compliance cost burden," said IGA Erna, in a statement, Wednesday, May 13.

The government has responded to this challenge through the dual-track system policy regulated in the HPP Law and PP No. 55 of 2022. This policy provides relaxation for taxpayers with a gross turnover below IDR 4.8 billion to simply make a simple record and be subject to a final tax of 0.5 percent.

Even though it has managed to capture millions of MSMEs into the administrative system, IGA Erna noted a paradoxical phenomenon in the field. "There is a tendency for business actors to remain in the 'comfort zone'. They are reluctant to increase the scale of their business or even manage their turnover reporting so that it remains below the threshold in order to avoid the hassle of full bookkeeping," he explained.

In addition, this simple recording facility sometimes makes literacy against Financial Accounting Standards (SAK EMKM) to be neglected.

Referring to Erich Kirchler's Slippery Slope framework, IGA Erna emphasized that tax compliance is influenced by two main pillars: the authority's power and the public's trust.

"If the state imposes complex bookkeeping prematurely, we do increase Power, but risk destroying Trust. MSME perpetrators who feel burdened will tend to hide in the informal sector or shadow economy," added IGA Erna.

According to him, the obligation to "record" is a vital calibration instrument for building Voluntary Compliance. Through simple recording, a perception of fairness (fairness) and habitual compliance is formed in which paying taxes is no longer considered a burden, but a normal business routine.

Furthermore, IGA Erna explained that registration has the effect of symbiosis of mutualism. In addition to fulfilling tax obligations, registration helps business actors monitor their financial health and facilitates access to financing, such as People's Business Loans (KUR).

"When MSMEs feel the economic benefits of administrative order, their trust in state regulations will reach its peak. This is the essence of voluntary compliance, which is much more valuable to the country than compliance due to coercion," he concluded.