ETHICS, BELIEFS, AND GOVERNANCE IN TAX COMPLIANCE: EVIDENCE FROM EMERGING MARKET SMES

This study examines tax compliance among small and medium enterprises (SMEs) from a tax governance perspective by analyzing how taxpayer trust and the power of tax authorities influence compliance through the mediating role of compliance intention. It further investigates whether the religiosity-based value of Balinese Hindu religiosity (Tri Kaya Parisudha) strengthens, and materialism weakens, the relationship between intention and actual compliance. Using a survey of 231 SME taxpayers in Bali and applying structural equation modeling-partial least squares (SEM-PLS) analysis, the findings reveal that both trust and authority power significantly enhance compliance intention, which in turn drives actual tax compliance behavior, consistent with recent studies on tax compliance behavior (Batrancea et al., 2022; Appiah et al., 2024). The results indicate that Tri Kaya Parisudha, as a moral and ethical framework emphasizing right thought, speech, and action, strengthens the translation of intention into compliant behavior. In contrast, materialism does not significantly moderate this relationship. From a tax governance perspective, these findings highlight the importance of balancing institutional trust and credible enforcement while incorporating socio-cultural and ethical values to promote sustainable tax compliance among SMEs. This study contributes to the tax compliance and governance literature by integrating institutional, psychological, and religiosity-based perspectives in a culturally specific context.