The income tax compliance of social media influencers during COVID-19 pandemic: An exploratory study

Abstract

Social media platforms have been an important source for the dissemination of information, especially during the COVID-19 social restrictions (work from home) mandate. As a result, most companies now rely more on social media influencers to deliver their brand values. However, many of these influencers do not report and pay their income tax from their social media paid activities. This study is the first to understand the reasons behind their tendency behavior to comply and or incompliance income tax in Indonesia during the COVID-19 pandemic. A qualitative method with in-depth interviews, observation, and documentation was used as the method of study. A total of thirteen Indonesian millennials influencers with a minimum number of 10,000 followers and taxable income from social media were involved in the study to share their views about their tax compliances behavior. Our findings revealed that there are indices that affect tax incompliant behavior among millennial social media influencers such as the sufficiency of knowledge about tax, unclear tax imposition and categorization mechanism, the level of trust, nationalism, and administrative needs for works. These finding also implies that there is an urge to educate influencers about tax compliance by using more suitable content and media to maximize the potential tax revenue from this booming profession.

Effects of Engagement Rate and Endorsement Rate on Social Media Endorsement Services on Indonesian Tax Compliance

“…It assumed that the endorser understands the taxes subjected to income received at a certain level. The results of this research are supported by the theory contained in the research of Prihatiningtias and Karo (2021), which shows that even though the income level of endorsers is high, they have a high level of tax compliance which is supported by the endorser's understanding of paying taxes for endorsement work as one of the obligations for paying taxes by taxpayers.…”

“…An increase in the endorser's income will also be followed by the level of endorser awareness that a tax must be paid for a level of income received. In the study of Prihatiningtias and Karo (2021), there were endorser respondents who were obedient and aware that increased tax payments would follow increased income. However, the responses must be supported by the provision of tax education owned by the respondent or the endorser.…”

“…According to Prihatiningtias and Karo (2021), most endorsers do not understand and know that income charged for endorsement services is subject to income tax because most endorsers do not understand the tax mechanism in Indonesia. Endorsers who understand their obligations as taxpayers and understand the tax mechanism in Indonesia tend to comply in carrying out their tax obligations.…”

“…In other words, with a high endorsement rate, the income earned by the endorser will be even greater. It is supported by the research of Prihatiningtias and Karo (2021), who states that the greater the endorser's income, the less desire the endorser has to report his taxes for fear of being subject to large amounts of tax. Thus, the second hypothesis of this research is:…”

“…In addition, Radvan (2021) also revealed that taxes imposed on endorser activities could be one of the revenue states. In Prihatiningtias and Karo (2021) research explain that the tax treatment of transactions carried out on social media platforms implemented by endorsers is regulated by the applicable tax laws. All endorsers who carry out endorsement activities and earn income should report their tax obligations via a Tax Letter of Notification (SPT).…”