Qualitative Analysis of the Implementation of Msme’s Income Tax: Is It on Target or Is It a Loophole for Tax Avoidance?

DOI

10.2991/978-94-6239-752-1_6How to use a DOI?

Keywords

MSME Taxation; Tax Policy; Tax Compliance

Abstract

This study aims to evaluate the implementation of MSME’s income tax policy in Indonesia. Using qualitative case study approach, this research collected data throught in-depth interviews, observations, and documentatios analysis conducted at the Directorate of Potential, Compliance, and Revenue of the Directorate General of Taxes. Our findings reveal three major issues. First, MSME income tax scheme has been widely misused by large business through firm splitting practices to benefit from lower tax rates. Second, turnover threshold of IDR500 million has created a monitoring gap and reduced the number of taxpayers making payments. Lastly, limited period eligibility for individual MSME creates inequity and administrative burdens for small business that have not yet grown beyond MSME scale. This study proposes several policy improvements to address these issues. Some of these recommendations include limiting the use of MSME tax facilities for business entities, utilizing e-commerce data integration and assigning digital platforms as tax collectors, and allowing lifetime use of MSME tax scheme for eligible individual taxpayers.

Copyright

© 2026 The Author(s)

Open Access

Open Access This chapter is licensed under the terms of the Creative Commons Attribution-NonCommercial 4.0 International License (http://creativecommons.org/licenses/by-nc/4.0/), which permits any noncommercial use, sharing, adaptation, distribution and reproduction in any medium or format, as long as you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license and indicate if changes were made.

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TY  - CONF
AU  - Siti Noor Aini Hidayah
AU  - Alan Afriyanto
PY  - 2026
DA  - 2026/09/04
TI  - Qualitative Analysis of the Implementation of Msme’s Income Tax: Is It on Target or Is It a Loophole for Tax Avoidance?
BT  - Proceedings of the9th International Conference on Business, Economics, Social Sciences & Humanities – Economics, Business and Management Track (ICOBEST-EBM 2026)
PB  - Atlantis Press
SP  - 54
EP  - 74
SN  - 2352-5428
UR  - https://doi.org/10.2991/978-94-6239-752-1_6
DO  - 10.2991/978-94-6239-752-1_6
ID  - Hidayah2026
ER  -