Research Article

The Role of Voice and Empathy in Trust on Tax Compliance

Deasy Ariyanti Rahayuningsih
Trisakti School of Management, Indonesia
* Corresponding author
Marvin Putra
Trisakti School of Management, Indonesia
DOI icon 10.24018/ejbmr.2025.10.2.2589

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Submitted 2025-01-07
Published 2025-03-29

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Article Main Content

This research aimed to extend the body of knowledge and provide empirical evidence regarding the effect of voice and empathy in trust on tax compliance. The study used a sample of 109 respondents who have been or are currently studying, working, earning, and actively paying taxes. The method used in selecting samples is purposive sampling. Primary data were collected via a questionnaire distributed through Google Forms and analyzed using Partial Least Square-Structural Equation Modeling (PLS-SEM). The results show that trust in government and tax authorities has an influence on tax compliance. Additionally, the moderating effects of voice and empathy were found to impact the relationship between trust in government and tax compliance. Voice and empathy also moderate the relationship between trust in government spending and tax compliance. However, trust in government spending does not influence tax compliance. The implications of this research are also useful for government and tax authorities in maximizing strategies for improving tax compliance through trust, voice, and empathy. Therefore, building participation, consistency, fairness, and transparency in government institutions is crucial to improving tax compliance.

Keywords: Empathy Tax compliance trust voice

Introduction

The tax compliance issue is not a trivial problem that can be solved in the next few years. According to data released by the OECD (2024) in Revenue Statistics in Asia and the Pacific, the tax-to-GDP ratio of Indonesia increased by 1.2% from 10.9% in 2021 to 12.1% in 2022. This percentage is still below the Asia-Pacific average of 19.3% in 2022 and the OECD average of 34.0%, standing at a difference of 22.0%. Indonesia’s below-average tax ratio is an outcome of tax compliance issues that reflect the inefficient and ineffective level of tax participation and collection. These problems have worsened due to ongoing discussions, such as the proposed 12% VAT rate hike in Indonesia, which has raised concerns about how it would affect consumer spending and compliance rates. AbdelNabiet al. (2022) suggests that governments facing many economic and social constraints may have to readjust their policies to minimize the impact of tax non-compliance behaviors that jeopardize the development and growth of a nation.

Research on tax compliance has grown to be a significant area of study with a wide range of methodologies from different taxpayer viewpoints. This is supported by the fact that the determinants of compliance and non-compliance behavior differ for each individual and country (Barbuta-Misu, 2011). Christian and Alm (2014) stated that several researchers have stated that non-economic variables can influence taxpayer compliance.

Nguyenet al. (2020) divides tax compliance into three theoretical categories: behavioral models, detterence theories, and economic and psychological models. Psychological, sociological, and economic factors contribute to the study of tax compliance by providing a profound understanding of the variables affecting tax compliance (Bornman, 2015). Despite the increasing result of studies remain inconsistent and do not fully describe the underlying factors that influence compliance behavior. Due to these inconsistencies, it is necessary to conduct research on various viewpoints, perceptions, and behaviors of taxpayers to discover the underlying motives of compliance/non-compliance behaviors.

In particular, measuring tax compliance in developing nations poses challenges due to the corrupt authority, the cost of audits, and the extensive informal sector. This informal sector includes activities that generate tax income and contribute to GDP when tallied. Because of these challenges, it is difficult to investigate and resolve the root cause of noncompliance behavior without effective measurement and rules. As a result, the state revenue is lower due to less-than-adequate tax collection, also known as the tax gap (AbdelNabiet al., 2022).

This research explores and examines three factors that might incentivize Indonesia’s tax compliance behavior. Voice refers to the ability to participate (express) in how decisions are made. Empathy involves providing taxpayers with empathy-triggering information regarding the utilization of tax collections. Trust, which has been well-documented in existing literature, contributes significantly to tax compliance. However, the trust variable may not be sufficient to explain an individual’s tax compliance behavior. Therefore, voice and empathy emerge as moderating variables that contribute and help create a more thorough knowledge of tax compliance. Indonesia, as a democratic country, emphasizes values such as transparency, accountability, and public participation. These principles are essential to preserve its democratic governance and ensure the effectiveness of public institutions. Thus, understanding the role of voice and empathy in tax compliance is crucial because they form a deeper connection and engagement rather than just a sense of trust, which is likely to improve tax compliance rates.

The aim of this research is to extend the body of knowledge and provide empirical evidence on how voice and empathy in trust influence tax compliance. The evidence obtained will contribute to a better insight of the elements that incentivized tax compliance. Furthermore, the results are not pertinent only to Indonesia. It can be beneficial for other countries that share similar economic and fiscal policies, cultural backgrounds, and histories. Finally, the study’s findings deepen our knowledge of the taxpayer behavior heterogeneity, which may be used to assist the tax reform process and identify possible instruments to improve compliance levels.

Literature Review and Hypotheses Development

Planned Behavior Theory

Explaining an individual’s behavior is not an easy task and highly complex. This complexity exists due to the various approaches and processes involved in explaining an individual’s behavior. The Theory of Reasoned Action is further developed by the modified theory known as the “Theory of Planned Behavior” (Ajzen, 1985). According to Fishbein and Ajzen (1975) Theory of Reasoned Action, individuals typically act in a reasonable manner; they consider the available information and assess the consequences of their actions (volitional control). The theory stated that the existence of individual intentions are the main factor influencing an action (Ajzen, 1991). However, of course, a person’s intention can change under certain conditions or circumstances that cause changes in behavior (incomplete volitional control). Therefore, Ajzen (1991) developed planned behavior theory to overcome the limitations of dealing with an individual’s partial volitional control.

Similar to the original concept of reasoned action, the “Theory of Planned Behavior” emphasizes an individual’s intention to engage in certain behaviors. These intentions are thought to reflect the factors that impact an action; in addition, they are indicators of what individuals are willing to attempt and how much effort they make (Ajzen, 1991). Reasoned action theory and planned behavior theory differ in the key elements used to assess an individual’s intention to engage in a behavior. These key elements are subjective norms, perceived behavior control and attitude toward behavior (Ajzen, 1991). Planned behavior theory has been used as a core theory, with its predictive ability validated in several studies, showing a positive impact to tax compliance intention (Bobeket al., 2007; Trivediet al., 2005; Efeberaet al., 2004). This implies that planned behavior theory is supported by substantial evidence that can accurately predict a wide range of behaviors. It may be possible to use planned behavior theory to explain a variety of actions under different circumstances without requiring the formation of new assumptions (Smart, 2012). Although the findings of planned behavior theory with tax compliance are still limited, the findings described above are sufficient to support the idea of planned behavior’s relevance in tax compliance studies.

Trust in Government and Tax Authorities

Governments, including tax authorities and political institutions, play a substantial role in shaping and directing individual and collective behavior through rules (Steinmo, 2017). Established rules guide what to do and what would happen if the rules are not followed, which we call sanctions. Political institutions are trustworthy if they establish rules with consistency, fairness, and transparency throughout all levels of society. If certain people or groups are permitted exemptions to the rules, or if the rules are created for individuals while excluding others, then the establishment of regulations will be impractical or inefficient. This flaw in setting rules will lower the expected value from social norms and diminish trust in the government and other government bodies. It is, therefore, critical to arrange regulations in a consistent, fair, and transparent way for building trust between social institutions, which is essential for society’s stability and cooperation.

Trust in authorities is the perception of a person or social group that tax authorities are trustworthy and serve the public interest (Wahlet al., 2010; Kirchleret al., 2008). Moreover, the relationship between taxpayers and tax authorities has changed from compulsion to partnership (Cirmanet al., 2021). The relationship between the two focuses on a “psychological contract” triggered by certain behaviors (Feld & Frey, 2002, p. 4). According to Feld and Frey (2002, p. 4), the emergence of this contract is associated with an emotional connection that goes beyond the fulfillment of formal obligations, resulting in an internal willingness to act compliantly. Feld and Frey (2007) and Kirchleret al. (2008) emphasize the necessity of considering how people perceive their treatment by tax authorities, as well as a mutual respect relationship, which encourages taxpayers to act faithfully and pay taxes honestly. In particular, trust in tax authorities leads to compliant behavior because taxpayers feel respected and valued, which in turn reinforces their trust in the system. This positive feedback loop can enhance overall tax compliance and support the public interest.

Prior research shows that the trust relationship between taxpayers and the government, including tax authorities, affects tax compliance (Trifanet al., 2023). According to Trifanet al. (2023), in order to improve tax compliance, an efficient tax system is required. This system includes good service and information transparency for taxpayers. Furthermore, trust between taxpayers and tax authorities could influence and encourage taxpayer compliance, commitment, and honesty. Most studies support the hypothesis that tax compliance will gain a positive impact when individuals have trust in government and tax authorities (Dularif & Rustiarini, 2022; Mas’udet al., 2019; Widuri & Irawan, 2019; Ali & Ahmad, 2014; Birskyte, 2014). Feld and Frey (2002) stated that trust should be the foundation of the relationship between taxpayers and authorities, where taxpayers declare their taxable income and authorities treat taxpayers with respect and without prejudice. However, Camellia and Putra (2023) and Taing and Chang (2021) resulted in different findings, whereas trust in government and authorities does not affect taxpayer tax compliance. It appears that taxpayers comply with their obligations based on the motivation to avoid sanctions imposed by government and tax authorities rather than out of trust (Camellia & Putra, 2023).

The government sees taxes as revenue and one of the most important components of national growth. In contrast, taxpayers see it as a legal expense and duty for the general benefit. As a result, taxpayers, especially those paying high taxes, must ensure accountability for how the government spends the funds. Building trust in the government’s ability to manage tax funds, the tax system must be transparent, accountable, and clear. Taxpayers should realize that the funds collected from them are appropriately distributed for the common welfare and public services. Therefore, in maintaining social, economic, and political stability, taxpayers need to trust in the government, including both spending and tax authorities (Inasius, 2019). Without trust, when taxpayers disagree with how their taxes are allocated, it can create tension for taxpayers and ultimately lead to non-compliance behavior.

Vincent (2021) researched the relationship between government spending on tax proceeds and tax compliance behavior, finding a significant negative effect between government spending and tax non-compliance behavior. According to this viewpoint, tax compliance is affected by taxpayer’ views of the advantages they obtain in exchange for paying taxes. It indicates that government expenditure on public goods that benefit taxpayers will increase and motivate compliance act. Barone and Mocetti (2011) pointed out that when taxpayers perceive and witness efficient allocation of government spending compared to revenue, their internal willingness to act in compliance will increase. Conversely, when taxpayers observe that the government engages in inefficient behaviors, they may get discouraged and seek retaliation in the form of tax evasion (Vincent, 2021; Nurkholiset al., 2020; Bodea & LeBas, 2016). The results of a positive link between government spending and tax compliance are supported by several prior studies (Alasfouret al., 2016; Palil, 2010; Almet al., 1992). However, research by Trifanet al. (2023) and Inasius (2019) did not produce significant findings about the relationship on government spending with tax compliance. The results are caused by taxpayers lack of faith in the government and tax authorities, which evokes an attitude of indifference toward government spending (Inasius, 2019; Trifanet al., 2023).

• H1: Trust in government and tax authorities influences tax compliance.

• H2: Trust in government spending influences tax compliance.

Moderation of Voice

Context and rules are instrumental in incentivizing a person’s compliant behavior (Steinmo, 2017). A person will comply in certain situations depend on their circumstances, driven either by cooperation or self-interest. The willingness of individual’s intrinsic to pay taxes will increase when he or she actively involved in the community, participates in voting and has a sense of responsibility for society (Horodnic, 2018). In addition, experimental data indicates that people are more cooperative when they have an input on how their taxes are used or how tax enforcement should be performed (AbdelNabiet al., 2022; Almet al., 1993; Casalet al., 2016; Koumpiaset al., 2021; Lambertonet al., 2018). According to McEwen and Maiman (1986), consensus-based regulation is more likely to be complied with; this is triggered by the participation of taxpayers in developing the rules. The more individuals who participate in the formation of the rules and comply with them, the stronger the sense of obligation will be, because of the bond established with the rules (Almet al., 1993). This reflects that giving taxpayers a role in how decision-making is made, which refers to voice, can trigger a sense of connection that will increase the influence of trust in the government and tax authorities on tax compliance.

How expenditure decisions are made and the nature of government spending are also important factors that affect tax compliance. Taxpayers may be protesting and unwilling to pay taxes if the tax revenue is being spent on expenditures that they disagree with. Moreover, when government spending is considered unreasonable and controversial, it tends to diminish compliance behavior (Almet al., 1993). Conversely, regardless of whether their vote differs from the majority, taxpayers are more likely to fulfill their tax responsibilities if they have a voice or an opportunity to express their preferences regarding how tax revenues are spent (Almet al., 1993; Lambertonet al., 2018). Voice acts as a moderating influence by transforming public trust in government spending into a feeling of financial responsibility. Citizens who have the ability to influence spending decisions feel more invested in the results, which enhances the relationship on tax compliance with trust in government spending. For instance, tax compliance in Swiss cantons is higher where citizens can directly influence fiscal policy than in cantons where citizens have no voice or participation (Kirchleret al., 2008; Pommerehne & Weck-Hannemann, 1996). This is possible because informed citizens will tolerate increases in taxes when spending by the government is reasonable and acceptable, which means citizens are involved and know where the taxes collected will be used (Kirchleret al., 2008). Therefore, trust alone cannot encourage compliance behavior because it cannot create a sense of ownership, responsibility, and commitment. AbdelNabiet al. (2022) and Almet al. (1993) stated that this concept of commitment suggests that those who have committed to a position are more inclined to comply with it, such as when they participate in the decision-making process. Furthermore, the disclosure of voting results provides information on the level of support for the collective decision, which may be useful for predicting the compliance behavior of other taxpayers.

In contrast, some research suggests that when individuals have a voice that does not generate positive outcomes, such a voice may not fulfill the individual’s interests, creating a negative influence on compliance (Cohen, 1985). Having an opportunity but not being able to express their preferences would make individuals feel less likely to have an actual voice. Similarly, when only having a choice between negative outcomes, individuals would choose to delegate their choices to others due to a lack of empowerment (Bottiet al., 2009). Another study conducted by Adekoya and Olayinka (2023) revealed that citizens’ voice also has a negative impact on tax compliance. Although the role of voice as a moderating variable in the relationship between trust and tax compliance has not been extensively explored in existing literature, this study could provide valuable insights. It could also contribute to enhancing public literacy and a comprehensive understanding of tax compliance.

• H3: Voice moderates the relationship between trust in government and tax authorities and tax compliance.

• H4: Voice moderates the relationship between trust in government spending and tax compliance.

Moderation of Empathy

The emotional condition of “putting oneself in someone else’s shoes,” or empathy, occurs when a person experiences the same or a comparable emotion as another person (Christian & Alm, 2014). As humans, each of us may have our own reasons why we help others. Batsonet al. (1981) stated that the reasons are driven either by being ultimately directed toward the helper’s benefit (egoistic) or genuinely increasing benefits for others’ welfare (altruistic). The egoistic motive may appear altruistic but is actually to reduce personal suffering, where personal suffering not only arises as a reaction to knowing others are suffering (such as shock, terror, and sadness) but also with an increasing number of negative emotions if not helping (such as guilt and shame) (Batsonet al., 1981). On the contrary, helping others reaches the altruistic level when an individual’s desire is to provide benefits (well-being) to people in need or reduce the suffering of others (Batsonet al., 1981).

People may dislike paying taxes due to their financial, cultural, political, or even moral value reasons (Sussman & Olivola, 2011). People who have such reasons usually view taxes as a loss without any reasonable return (funds wasted) (Kirchler, 1998). This negative perception can have serious implications on state revenue, especially for countries that have a large percentage of tax revenue. As a way of addressing this issue, the government made information regarding the allocation of tax income among different categories transparent and disclosed publicly. Therefore, this information would provide taxpayers with better information on how their money is being spent.

Thaler (1999) and AbdelNabiet al. (2022) stated that the perceived benefits of what is obtained in return from tax payments will determine the timing of payment and tax compliance. It is possible that when people empathize with the beneficiaries of public spending, there will be an emotional response that suppresses the negative impact of distrust in government and tax authorities. As a result, empathy can moderate the influence of trust in government and tax authorities on tax compliance, even in the presence of distrust. A lot of existing literature discusses individuals’ perceptions of what they get when they fulfill their tax obligations, which may affect their level of compliance (Barbuta-Misu, 2011; Bornman, 2015; Hassanet al., 2021; Inasius, 2019; Mannanet al., 2020; Taing & Chang, 2021; Vythelingumet al., 2017).

When taxpayers have poor faith in government spending, they often perceive their contributions as wasted or misallocated. However, empathy can counteract this perception by making taxpayers feel more connected to the intended beneficiaries of government initiatives, which could increase level of compliance. This behavior occurs because taxpayers view their tax payments as contributions to societal welfare rather than personal losses. Moreover, people tend to get a psychological lift when they contribute to the welfare of others (AbdelNabiet al., 2022). Empathy which driven by information about how tax revenues are used, can moderate the relationship on trust in government spending with tax compliance by raising either feelings of personal discomfort (egoistic empathy) or a genuine desire to improve others’ welfare (altruistic empathy).

Nonetheless, there is currently limited and rare usage of empathy-triggering information on tax compliance. Currently, no other study has rigorously evaluated the effect of empathy as a moderating variable in trust to tax compliance. Research by AbdelNabiet al. (2022) provides empathy-triggering information, which resulted in the findings that empathy has a significant effect on tax compliance. Christian and Alm (2014) also conducted research that supports this evidence. Research by Jacquemetet al. (2019) also stated that empathy can be used to explain tax compliance. However, the study found that the economic correlation is not significant, with more than 80% of the variation in tax compliance behavior still cannot be explained by the empathy factor (Jacquemetet al., 2019). These findings indicate that empathy can influence monetary decision-making, including tax compliance, but its entire impact is complicated and not yet fully understood.

• H5: Empathy moderates the relationship between trust in government and tax authorities and tax compliance.

• H6: Empathy moderates the relationship between trust in government spending and tax compliance.

Research Method

Primary data were collected using questionnaires via Google Form application and distributed online for respondent convenience. The method used is purposive sampling, with the sample distribution and procedure shown in Table I. The criteria used for the selection of respondents are those who have been or are now enrolled in college, are working and earning, are actively paying taxes (taxpayers), and have an NPWP (Taxpayer Identification Number). The samples included in the analysis were 109 respondents and analyzed using PLS-SEM (Partial Least Squares-Structural Equation Modeling) with the WarpPLS 7.0 application.

Description Total Percentage
Questionnaires distributed online 178 100%
Questionnaires that do not meet the requirements 69 39%
Total questionnaire used in the study 109 61%
Table I. Sample Distribution and Returned Questionnaire

The study categorized the variables into three groups, namely the dependent variable, the moderating variable, and the independent variable. Tax Compliance (TC) is the dependent variable. The moderating variables consist of Voice (V) and Empathy (E). Lastly, the independent variables are Trust in Government and Tax Authorities (TGTA) and Trust in Government Spending (TGS). The detailed summary of each variable with its description and measurement is in Table II.

Variable name Symbol Description Source Measurement Variable type
Tax Compliance TC Willingness to comply with tax obligations. (AbdelNabiet al., 2022) Dummy variable (0 = Continuing paid the wrong value, 1 = Reported the problem) Dependent
Voice V Ability to participate in decision-making processes. (AbdelNabiet al., 2022) Dummy variable (0 = Continuing paid the wrong value, 1 = Reported the problem) Moderating
Empathy E Emotional reaction trigerred by information. (AbdelNabiet al., 2022) Dummy variable (0 = Continuing paid the wrong value, 1 = Reported the problem) Moderating
Trust in Government and Tax Authorities TGTA Perceived appropriateness and validity of government acts. (Trifanet al., 2023) 5-point Likert scale (from 1 strongly disagree to 5 strongly agree) Independent
Trust in Government Spending TGS Perception that tax compliance decisions resulted from taxpayers awareness on how important taxes are, their relationship with public spending, and public welfare. (Trifanet al., 2023) 5-point Likert scale (from 1 strongly disagree to 5 strongly agree) Independent
Table II. Summary of Variables and Measurements

Table III presents the descriptive statistics of sample, which provide information on gender, age, education, experience, occupation, and income level. The results for the validity and reliability tests can be seen in Tables IV and V. In Table IV, there are measurement results for Average Variance Extracted (AVE), where each variable produces a value of more than 0.50. Additionally, the factor loadings in Table IV show the results, where all indicators produce a value of more than 0.70. This result illustrates that the variables used are valid and meet the convergent validity criteria. Table V also shows that discriminant validity criteria are met, where each indicator’s loading is greater than the cross-loadings factor. Cronbach’s alpha and composite reliability in Table IV for reliability testing produces values for all variables more than 0.70, indicating that the variable measurement indicators are reliable.

Descriptives Statistics descriptive Percentage
Gender Frequency
 Male 41 (37.61%)
 Female 68 (62.39%)
Age
 18–24 40 (36.70%)
 25–31 25 (22.94%)
 32–38 12 (11.01%)
 >39 32 (29.35%)
Education
 High School 11 (10.09%)
 Bachelor Degree 60 (55.05%)
 Master Degree 22 (20.18%)
 Others 16 (14.68%)
Experience
 <1 Year 12 (11.01%)
 >1 Year 97 (88.99%)
Occupation
 Tax Accounting Education 41 (37.61%)
 Finance 25 (22.94%)
 Management 7 (6.42%)
 Others 36 (33.03%)
Income Level
 <Rp4.000.000 27 (24.77%)
 Rp4.000.000–Rp6.000.000 18 (16.51%)
 Rp6.000.000–Rp8.000.000 17 (15.60%)
 Rp8.000.000–Rp10.000.000 14 (12.84%)
 >Rp10.000.000 33 (30.28%)
Table III. Sample Descriptive Statistics
Construct Items Factor loadings Cronbach’s alpha Composite reliability Average Variance Extracted (AVE)
TC TC1 1.000 1.000 1.000 1.000
V V1 1.000 1.000 1.000 1.000
E E1 1.000 1.000 1.000 1.000
TGS TGS1 0.816 0.794 0.880 0.709
TGS2 0.832
TGS3 0.877
TGTA TGTA1 0.908 0.923 0.945 0.812
TGTA2 0.920
TGTA3 0.880
TGTA4 0.898
Table IV. Measurement Model
Indicator TC V E TGS TGTA V×TGTA V×TGS E×TGTA E×TGS
TC (1.000) 1.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000
V 0.000 (1.000) 0.000 0.000 0.000 0.000 0.000 0.000 0.000
E 0.000 0.000 (1.000) 0.000 0.000 0.000 0.000 0.000 0.000
TGS1 0.000 0.541 −0.625 (0.816) 0.000 −7.581 6.044 7.510 −5.897
TGS2 0.000 −0.277 0.340 (0.832) 0.016 3.030 −2.409 −3.025 2.387
TGS3 0.000 −0.241 0.260 (0.877) −0.015 4.181 −3.340 −4.119 3.223
TGTA1 0.000 −0.032 0.048 0.223 (0.908) −0.317 0.217 0.471 −0.438
TGTA2 0.000 0.092 −0.051 0.059 (0.920) −2.669 2.125 2.667 −2.128
TGTA3 0.000 0.052 −0.182 −0.046 (0.880) −0.027 0.007 −0.127 0.204
TGTA4 0.000 −0.112 0.182 −0.241 (0.898) 3.080 −2.402 −3.082 2.422
V×TGTA 0.000 0.000 0.000 0.000 0.000 (1.000) 0.000 0.000 0.000
V×TGS 0.000 0.000 0.000 0.000 0.000 0.000 (1.000) 0.000 0.000
E×TGTA 0.000 0.000 0.000 0.000 0.000 0.000 0.000 (1.000) 0.000
E×TGS 0.000 0.000 0.000 0.000 0.000 0.000 0.000 0.000 (1.000)
Table V. Indicator Loadings and Cross-Loadings Results

Results and Discussion

Fig. 1 shows the research model and the relationship between the variables of voice (V), empathy (E), trust in government and tax authorities (TGTA), and trust in government spending (TGS). The figure also shows the results for the path coefficient (β) and the degree of significance (p-value) for each relationship, including the moderating effect. The adjusted r-square value in the results is 0.04. This result implies that only about 4% of the variation in tax compliance variables can be explained by the variables used in the study, with the other 96% attributed to the variables not discussed. This low adjusted R-square highlights one of the study’s limitations and raises concerns regarding the suboptimal research model.

Fig. 1. Research model and hypothesis testing results.

The result for trust in government and tax authorities (TGTA) in Table VI shows a significant value of 0.019, lower than alpha 0.05, and has a positive coefficient of 0.192. This result confirms that H1 is supported and implies that trust in government and tax authorities has a positive influence on tax compliance. A sense of trust will be created when institutions like the government, including tax authorities, formulate and develop rules and environments that are consistent, fair, and transparent. Such a trust relationship will create an emotional connection that goes beyond the fulfillment of individual obligations through tax payments, also known as a psychological contract. This contract will encourage taxpayers to comply voluntarily because they feel respected and valued.

Hypothesis Path coefficient P Value Result
H1: Trust in government and tax authorities influences tax compliance. 0.192 0.019 Supported
H2: Trust in government spending influences tax compliance. −0.123 0.094 Not Supported
H3: Voice moderates the relationship between trust in government and tax authorities and tax compliance. 0.351 <0.001 Supported
H4: Voice moderates the relationship between trust in government spending and tax compliance. −0.281 0.001 Supported
H5: Empathy moderates the relationship between trust in government and tax authorities and tax compliance. −0.519 <0.001 Supported
H6: Empathy moderates the relationship between trust in government spending and tax compliance. 0.390 <0.001 Supported
Table VI. Hypothesis Testing Results

The result for trust in government spending (TGS) in Table VI shows a significant value of 0.094, higher than alpha 0.05, and has a negative coefficient of −0.123. This result means that H2 is not supported and implies that trust in government spending has no influence on tax compliance. Trust in government spending is closely related to how the government uses the collected taxes. However, some taxpayers may exhibit an indifference attitude towards the allocation of funds due to their initial lack of trust in government agencies. Even if the funds are used by the government toward public welfare, this distrust prevents taxpayers from being motivated to comply with tax obligations. Moreover, rather than due to their trust government spending, taxpayers are probably more inclined to comply in order to avoid penalties.

The result for voice (V) as the moderating effect on the relationship between trust in government and tax authorities and tax compliance in Table VI shows a significant value of <0.001, lower than alpha 0.05. It has a positive coefficient of 0.351. This result means that H3 is supported and implies that enhancing tax compliance may require more than just the trust’s relationship to tax compliance. This relationship illustrates that involvement or participation in decision-making brings a sense of responsibility toward society, and therefore their intention to comply with tax obligations tends to increase. However, voice strengthened the link on trust in government and tax authorities with tax compliance by fostering a sense of obligation and connection to the tax system.

Voice (V) as the moderating effect on the relationship between trust in government spending and tax compliance in Table VI results in a significant value of 0.001, lower than alpha 0.05. It has a negative coefficient of −0.281. This result means that H4 is supported, which implies that voice moderates the link between trust in government spending with tax compliance. This relationship has a negative coefficient, meaning that an increase in voice will weaken the link on trust in government spending with tax compliance. Such a result may occur when spending decisions by government do not align with taxpayers’ interests or preferences. When individuals feel that their voice has no impact on decision-making or their participation is ignored, it leads to frustration and decreased commitment to compliance. Hence, it concludes that voice can weaken the influence of trust in government spending on tax compliance because there is a gap between taxpayer expectations and government action.

Empathy (E) as the moderating effect on the relationship between trust in government and tax authorities with tax compliance in Table VI produces a significant value of <0.001, lower than alpha 0.05. It has a negative coefficient of –0.519. This result means that H5 is supported, which implies that empathy moderates the relationship between trust in government and tax authorities and tax compliance. This relationship has a negative direction, meaning that empathy weakens the link on trust in government and tax authorities with tax compliance. If taxpayers empathize with the recipients of public funds but remain skeptical about the inconsistency, fairness, and transparency of the government and tax authorities, this could reduce their willingness to comply. Taxpayers may feel frustrated by both attitudes (empathy and skepticism) and view taxes as wasted funds. Instead of encouraging compliance, this can lead taxpayers to be more aware and more skeptical of the government. Consequently, the perception of government ineffectiveness weakens the relationship between trust in government and tax authorities and tax compliance.

The results for the moderating effect of empathy (E) in Table VI on the relationship between trust in government spending with tax compliance yield a significant value of <0.001, lower than alpha 0.05. It has a positive coefficient of 0.390. This result means that H6 is supported and implies that empathy moderates the link between trust in government spending with tax compliance. The way empathy elicits an emotional response to public spending can trigger an increased level of tax compliance. In order to stimulate empathy, the government discloses information on the allocation of tax collected and helps taxpayers understand to whom and how their contribution is distributed. When taxpayers begin to feel empathy regarding the recipients of public spending, such as low-income communities benefiting from social services, this empathy can encourage compliance behavior. Moreover, empathy also helps reduce the perception that taxes are a loss when taxpayers don’t see a direct benefit (return). When taxpayers see their tax contributions as being used for social welfare rather than personal loss, they will be more likely to comply, thereby strengthening the link on trust in government spending and tax compliance

Conclusions

Throughout the research, it can be concluded that trust in government and tax authorities affects the level of tax compliance. In contrast, the results show that trust in government spending does not affect tax compliance. Voice and empathy as the moderating effect on the relationship between trust and tax compliance shows influential results. The results of this study can provide a deeper understanding of the factors that can incentivize tax compliance and be used by the government to identify instruments that might increase the level of tax compliance.

This study has several limitations. First, as shown in Fig. 1, the adjusted r-square shows that the model is not optimal for explaining the factors that incentivize tax compliance. Second, the use of dummy variables in measuring the dependent variable causes a high risk of multicollinearity and a less stable or accurate interpretation of the effect results. Third, the variables used in the study are still very few compared to other studies on tax compliance. Fourth, the research population and sample were limited to Indonesia and distributed online through Google Forms.

Future research should aim to enhance the validity, stability, and accuracy of models explaining tax compliance. Researchers should consider to add some other variables and further developing the model to give a broader understanding of the elements affecting tax compliance. Specifically, it suggested that future research may have to consider the impact of Indonesia’s VAT increase to 12%, which may affect tax compliance and provide a different context and results for the study. Broadening the sample and research population outside Indonesia is also necessary to increase the generalizability and variety of data. Additionally, researchers recommended distributing questionnaires directly to reduce potential bias and improve data quality.

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