The Impact of Basic Infrastructure on Tax Effort: A Case Study of Municipalities/Regencies in Indonesia

Discussions of tax morale emerge from the failure of the economic deterrence model to fully explain the degree of tax compliance. The vital role assigned to tax revenue as a significant contributor to national government income. Consequently, almost all countries have a serious concern with increasing their tax performance since more than half of the countries in the world, more than 80 percent of the government budget is dependent on tax revenue. A fiscalpsychological model shows how the relationship between tax authorities and taxpayers can emerge through the provision of a stimulus from tax authorities, so that taxpayers’ attitudes become more positive, which increases their willingness to pay taxes. Hence, governments should be aware of the demand for infrastructure, because invrastructure provision can increase the moral motivation of citizens to pay tax. In this research, more than a half of infrastructure variables are significant and positively correlated to tax performance indicators. That is a proof that in general, better quality of infrastructure in particular region lead to better tax performance. However, the inconsistency of the effect shows that increased quantity (in this case of infrastructure) should be accompanied by increased quality, and vice versa.