1.1. The concept of tax compliance

As stated by James and Alley, tax compliance was defined "in terms of the degree to which taxpayers comply with the tax law" [1]. Tax compliance is the tax payers' compliance with tax laws and regulations, while the concept assumes willingness of the tax payers to comply with their liabilities without being inspected, prosecuted, and without a need for a threat or a sanction [2]. The concepts of tax ethics and tax consciousness are hidden in this definition. Tax consciousness is defined as a necessary fact that helps to know the extent to which changes in people's tax burden will affect their behavior [3]. Besides that, tax moral is also defined as "taxpayers' intrinsic motivation to pay taxes" in [4]. Higher the tax consciousness happens, higher the tax morality becomes. As long as the tax consciousness occurs and increases, tax moral will increase and a perception of tax compliance will develop (Figure 1).

The tax compliance shaped by tax consciousness and tax ethics should be completed by the stages of taxing in terms of the tax payer. The content of tax compliance is described in four parts [5]:

> Even though the study has its limitations, it will help in the development of a perception of tax compliance through information before tax-paying experience and efforts for the creation of social norms in terms of its novelty. Thus, it will show whether such efforts will have an impact

**TAX COMPLIANCE**

Keystones of Performing a Proper Tax Policy Design for Tax Compliance: Does Perception of Tax Compliance…

Tax Ethics

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Complying with tax requirements completely

http://dx.doi.org/10.5772/intechopen.70816

*Sanc�on Inspec�on*

**For Tax Administra�on** *Informa�on*

Tax compliance may be defined in two ways namely formal compliance and financial compliance. Formal compliance is the compliance with the formal requirements in terms of tax laws by the tax payers. Financial compliance is the compliance with the financial requirements by the tax payers based on the letter and spirit of tax laws. Formal tax compliance is a complementary

on the efficiency of future tax income.

**For Tax Payers** *Social Norms Individual Differences*

Perceiving the importance of tax for state income

> *Government Trus�ng the*

Tax

Consciousness

1.2. Types of tax compliance and effective factors

Figure 1. Forward-reverse connections of tax compliance. Source: Author's illustration.


In our study, the concept of tax compliance will be tested with empirical experiments on university students who are not tax payers yet, but have knowledge about these issues because of their level of education. For this paper, it is preferred to use lab experiment with undergraduate students. As referred in [6], most laboratory experiments which have been conducted by using students are very common. The reason is that in these experiments, it is realized that the responses of students are often heavily the same as the responses of other subject pools in similar lab experiments. Unlike Levitte and List (2007) and Kogler et al. [27], students as a subject pool are useful in many studies [7–10].

Keystones of Performing a Proper Tax Policy Design for Tax Compliance: Does Perception of Tax Compliance… http://dx.doi.org/10.5772/intechopen.70816 195

Figure 1. Forward-reverse connections of tax compliance. Source: Author's illustration.

Even though the study has its limitations, it will help in the development of a perception of tax compliance through information before tax-paying experience and efforts for the creation of social norms in terms of its novelty. Thus, it will show whether such efforts will have an impact on the efficiency of future tax income.
