Understanding MSME Tax Compliance: The Role of Mental Accounting, Tax Awareness, Sanctions, and Socialization in Medan Marelan

Abstrak

Micro, small, and medium enterprises contribute substantially to employment and local economic activity, yet many still struggle to meet tax obligations consistently. This study examines whether mental accounting, tax awareness, tax sanctions, and tax socialization explain tax compliance among MSME taxpayers in Medan Marelan. Using a quantitative cross-sectional survey, data were collected from 100 active MSME taxpayers through purposive sampling. Analysis employed partial least squares structural equation modeling with SmartPLS 4. The measurement model demonstrates satisfactory indicator reliability, convergent validity, and internal consistency. The structural model explains 86.1 percent of variance in tax compliance. Results show mental accounting has a positive but statistically nonsignificant effect, while tax awareness has a negative and nonsignificant effect. In contrast, tax sanctions exert the strongest significant positive effect on compliance, followed by tax socialization. Findings suggest financial cognition and declarative awareness do not automatically translate into compliant behavior when MSMEs face limited capital and administrative complexity. Consistent enforcement and accessible education appear more influential because they increase perceived consequences and reduce procedural uncertainty. This study extends Indonesian MSME tax literature by showing behavioral and institutional determinants vary across local contexts. Therefore tax authorities should combine transparent proportional enforcement with continuous practical digitally accessible assistance.