Tax Incentives and the Sustainability of SMEs: The Role of Taxpayer Compliance
DOI:
https://doi.org/10.35334/ak3avt53Keywords:
Tax incentives, Msmes, Business sustainability, Taxpayer compliance, Pls-semAbstract
This study investigates whether taxpayer compliance mediates the relationship between perceived tax-incentive utilization and business sustainability among formally registered micro, small and medium enterprises in Tarakan, Indonesia. A cross-sectional survey of owners and managers was analysed using partial least squares structural equation modelling. Tax-incentive utilization was operationalized through understanding, information access, and satisfaction, while business sustainability reflected turnover, customer development, and continuity of planning. The results show that perceived utilization is positively related to both business sustainability and taxpayer compliance. However, compliance is not directly related to sustainability after incentive utilization is considered and does not mediate the relationship. The findings suggest that administrative compliance and productive business outcomes may develop through parallel rather than sequential pathways. The novelty lies in testing compliance as an institutional conversion mechanism between fiscal relief and short- to medium-term business viability in a peripheral emerging-economy setting. Policy should combine accessible tax relief with stronger links to finance, procurement, certification, training, and market access. Because the design is cross-sectional and based on purposive self-reports, the results should be interpreted as exploratory associations rather than causal effects.
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