The Effect of Legal Literacy Level on Tax Payment Compliance of MSME Actors

Abstract

This study examined the effect of legal literacy on tax payment compliance among Micro, Small, and Medium Enterprises. Tax compliance remains an important issue because the contribution of the sector to national economic growth has not been fully reflected in tax revenue. Legal literacy was considered a crucial factor influencing taxpayers’ understanding of their rights, obligations, and legal consequences related to taxation. Therefore, this study investigated whether a higher level of legal literacy contributed to greater tax payment compliance among business owners. This study employed a quantitative approach using an associative research design. Primary data were collected through questionnaires distributed to 50 Micro, Small, and Medium Enterprise owners selected through purposive sampling. The collected data were processed and analyzed using descriptive statistics, classical assumption tests, and simple linear regression analysis. The classical assumption tests consisted of normality, heteroscedasticity, and linearity tests to ensure the suitability of the regression model. The findings revealed that legal literacy positively influenced tax payment compliance among Micro, Small, and Medium Enterprise owners. Business owners with a higher understanding of taxation regulations, legal rights and obligations, and legal sanctions demonstrated greater compliance in fulfilling their tax responsibilities. The study concluded that improving legal literacy could strengthen voluntary tax compliance and support efforts to increase tax revenue from the Micro, Small, and Medium Enterprise sector. These findings highlighted the importance of legal education and taxation awareness programs in promoting sustainable tax compliance behavior.