Influence of justice, culture and love of money towards ethical perception on tax evasion with gender as moderating variable

Publication Date11 January 2020
Date11 January 2020
AuthorDodik Ariyanto,Gusti Ayu Putu Weni Andayani,I. Gusti Ayu Made Asri Dwija Putri
SubjectAccounting & Finance,Financial risk/company failure,Financial compliance/regulation,Financial crime
Inuence of justice, culture and
love of money towards ethical
perception on tax evasion with
gender as moderating variable
Dodik Ariyanto
Department of Accounting, Udayana University, Denpasar, Indonesia, and
Gusti Ayu Putu Weni Andayani and
I. Gusti Ayu Made Asri Dwija Putri
Department of Accounting, Faculty of Economics and Business,
Udayana University, Denpasar, Indonesia and Bukit Campus, Jl.
Unud Jimbaran Raya Campus, South Kuta District, Badung Regency, Bali
Purpose The purpose of this study is to evaluate the inuence of justice, culture and love of money on
ethical perceptions about tax evasion.As well as gender will strengthen the inuence of justice, culture and
love of money on ethicalperceptions about tax evasion.
Design/methodology/approach The primary data were collected and analyzed using a popular
component-based model called partial least square (PLS). PLS consists of two sub-models, measurement
model or outer model and structural model or inner model. The measurement model shows how real or
observable variables are latent variables to be measured. While the structural model shows the level of
estimationbetween latent or construct variables.
Findings The statistical analysis showed that neither the coefcient of gender (moderating variable) nor the
interaction between gender and the exogenous variable are signicant. Solimun (2010) explained that such
moderating variable is called homologizer moderation (potential moderation). Homologizer moderation refers to
variable that may potentially become a moderating variable inuencing relationship betweenpredictor (exogenous)
and dependant variable (endogenous). This variable has no interaction with predictors or can be said to be
insignicant on the dependent variable. In this study, gender is a potential moderating variable (homologizer
moderation). Gender can potentially become a moderating variable inuencing relationship between justice, culture
and love of money and ethical perception on tax evasion. Gender does not have interaction with justice, culture and
love of money or signicant inuence toward ethical perception on tax evasion.
Originality/value There are very few studies on tax evasion from an ethical point of view so this
study is not only important but also interesting because it shows that tax evasion is a classic problem
taking place in nearly all countries that apply taxation system; cultural difference results in different
views on ethical perceptions on tax evasion (Basri, 2015); this study uses the local wisdom of Balinese
people, namely, Tri Hita Karana and thus, this study becomes relatively new; justice is one of the non-
economic variables of tax compliance behavior (Darmawan, 2012), so that the researcher is interested
in conducting further research on the effect of justice toward ethical perception on tax evasion; there
are very few studies discussing love of money (Hnisz et al.,2013);therefore, research on the effect of
love of money toward ethical perception on tax evasion is of necessity and the ndings of previous
studies that are inconsistent. The researcher predicted that there are contingency factors that
inuence the relationship between justice, culture and love of money toward ethical perceptions on
tax evasion. As suggested by Baridwan (2012), gender, the moderating variablein this study, refers to
masculine and feminine character as a dimension of social culture; this study is carried out in the Tax
Service Ofce (KPP Pratama) of Badung Utara because during the 2015 tax year, KPP Pratama
Inuence of
justice, culture
and love
Journalof Money Laundering
Vol.23 No. 1, 2020
pp. 245-266
© Emerald Publishing Limited
DOI 10.1108/JMLC-06-2019-0047
The current issue and full text archive of this journal is available on Emerald Insight at:
Badung Utara was one of the KPPs in Bali DGT Regional Ofce which experienced a decline in
realization of revenues and a sharp decline in growth.
Keywords Tax evasion, Ethical perception, Inuence of justice, Self-assessment system,
Taxation law, Directorate general of taxes
Paper type Research paper
1. Background
Tax is a type of state revenue used for development and government nancing. Between 2010
and 2015, tax had more than 70 per cent contribution toward the State Budget; the percentage
shows that revenue from the taxation sector plays an important role compared to other sources of
state revenue. An important aspect of tax revenue is to increase taxpayer compliance. Taxpayer
compliance is central to the taxation system because Indonesia applies self-assessment system.
Self-assessment systemis a tax collection system that authorizes taxpayersto determine
amount of tax payable each year in accordance with the applicable tax laws (Resmi, 2014,
p. 11). The logical consequenceof self-assessment system is to give full trust to taxpayers to
calculate, deposit and report their taxes. Tax authority is responsible for guiding and
supervising implementationof tax obligations from taxpayers under the TaxationLaw.
Self-assessment system has been implemented in Indonesia since 1983 and having been
implemented for three decades, the system does not seem to have shown encouraging result.
Indonesias tax ratio between 2012 and 2014 is only 11.9 per cent, much lower when compared to
Singapore (14 per cent), the Philippines (12.9 per cent), Thailand (16.5 per cent) and Malaysia (16.1
per cent) (World Bank, 2014). Data obtained from the Ministry of Finance shows that the
realization of national tax revenues from 2011 to 2015 has not met its estimated target. Table I
shows target and realization of national tax revenues between 2011and 2015.
Low tax ratio and the fact that the realization of national tax revenue has not its estimated
target indicated that that the government, more particularly the Directorate General of Taxes
(DGT), should generate higher tax revenues for national development acceleration.
Tax payers are trying to minimize their tax payments through various type of tax resistance
because taxes have coercion element. According to Kirchler et al. (2003), tax avoidance and tax
evasion are examples of active resistance to taxes. Tax avoidance leads to attempt to reduce taxes
legally by looking for loopholes or weaknesses of the Taxation Law, while tax evasion leads to
attempt to reduce taxes illegally by involving fraud, concealment, or omitting records (Fisher, 2014).
Tax evasion has occurred in Indonesia.As an example is tax evasion carried out in 2007
by PT Asian Agri Group (AAG) and its 14 subsidiaries. They had 1,259 trillion rupiahstax
evasion for over four years and therefore, were ned 2.5 trillion rupiahs (Aidin, 2013). In
2008, PT Metropolitan and three BakrieGroup companies, namely PT Arutmin, PT Kaltim
Prima Coal, and PT Bumi Resource, carriedout tax evasion and bribed Gayus Tambunan, a
Table I.
Target and
realization of tax
revenue in Indonesia
between 2011 and
Year Target (Trillion of Rupiahs) Realization (Trillion of Rupiahs) (%)
2011 878.65 873.82 99.45
2012 1.011.70 980.17 96.88
2013 1.139.32 1,040.32 91.31
2014 1.246.10 1,143.30 91.75
2015 1.294.25 1,055.00 81.50
Source: data processing in 2016

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