Kontigensi: Jurnal Ilmiah Manajemen Vol.
No.
June 2025, pp.
ISSN 2088-4877
LEVERAGING DIGITAL ACCOUNTING AND DIGITAL TAXATION:
ENHANCING FINANCIAL REPORTING QUALITY
Hisar Pangaribuan*1.
Muhammad Saddam2.
Wing Wahyu Winarno3 1Universitas Advent Indonesia.
Bandung.
Indonesia 2STIE Hidayatullah Depok.
Jawa Barat.
Indonesia 3Sekolah Tinggi Ilmu Ekonomi YKPN.
Yogyakarta.
Indonesia e-mail: *1pangabhsr@gmail.
com, 2muhammad.
saddam@stiehidayatullah.
3wing@stieykpn.
DOI: https://doi.
org/10.
56457/jimk.
Received: May 21, 2025 Accepted: June 20, 2025 Published: June 25, 2025 Abstract By integrating advanced software and cloud-based solutions, digital accounting (DA) and digital taxation (DT) have transformed traditional accounting and tax practices.
This research looks into the effects of DA and DT on financial reporting quality (FRQ) and tax compliance (TC) among Indonesian SMEs.
The research employs a survey methodology, collecting data from 207 accountants and managers in Indonesian SMEs.
Using Smart PLS for analysis, the study validates the constructs and tests the hypotheses.
The results indicate that DA significantly enhances FRQ and directly improves TC, while DT positively affects FRQ and, through improved report quality, enhances TC.
These findings highlight the dual pathways through which digital technologies influence TC directly through operational efficiencies and indirectly via improved financial reporting.
This research provides empirical evidence on the synergistic effects of DA and DT in the SME context, an area that has received limited research attention, thereby contributing to the existing literature.
Adopting these digital tools can lead to more accurate financial reporting and higher TC, providing valuable insights for policymakers and SME practitioners aiming to leverage digital solutions for enhanced business transparency and regulatory adherence.
The study emphasizes the necessity of tailored digital strategies to realize these benefits fully.
KeywordsAi digital transformation, accounting practices, financial transparency.
SMEs
INTRODUCTION
efficiency, and availability of financial The implementation of digital Moreover, tax process technologies in production has led to streamlining, helped by DT systems, allows more compliance and minimum management, affecting accounting and errors through automation that is prone taxation (Dmytryk et al.
, 2.
The to real-time reporting processes paper of (Gnatiuk et al.
, 2.
notes that (Catubig, 2.
The developments deposit accounting with modern create an important window for small algorithmic software and cloud services and medium-sized enterprises (SME.
has changed traditional bookkeeping in Indonesia that suffer from traditional methods through greater accuracy, manual accounting practice with Kontigensi: Jurnal Ilmiah Manajemen Management Science Doctoral Program.
Pasundan University.
Bandung.
Indonesia https://creativecommons.
org/licenses/by-nc/4.
Kontigensi: Jurnal Ilmiah Manajemen Vol.
No.
June 2025, pp.
ISSN 2088-4877
taxation compliance issues to relook their operations approach (Yusuf et al.
SMEs are a crucial component of Indonesia's economy, contributing substantially to employment and GDP.
However, many of these enterprises need help maintaining high-quality financial reports and achieving full TC due to resource constraints and limited (Gosal.
The combination of DA and DT offers a chance to tackle these problems by improving the precision of financial reporting and assuring better adherence to tax legislation (Adhiatma et al.
, 2022.
Pangaribuan et al.
, 2.
This research investigates the impact of DA and DT on FRQ and TC among Indonesian SMEs, intending to draw attention to the revolutionary possibilities of digital technologies in improving TC and company transparency.
Even with various advances in DA and DT.
Indonesian SMEs still struggle to prepare accurate financial reports while engaging in complete transparency (Ningsih, 2.
The traditional methods of accounting and taxation also require much efficiency and perfection without transparency, which leads to inaccuracies in the process and cases of tax evasion.
These primarily constitute problems in SMEs since there would be a shortage of technology and digital skills.
The urgency for a digital transformation in these areas lies in the availability of digital solutions that can assist in more robust financial reporting and enhanced TC (Belahouaoui, 2024.
Palar et al.
In response to this particular issue, the authors conduct research encompassing the question of how Indonesian SMEs utilize DA and DT to enhance their FRQ and TC directly and This study seeks to assess the effect of DA and DT on FRQ, with consequential impacts for TC in Indonesian SMEs as its primary It explains the synergy between DA and DT by analyzing what leads to an increase in FRQ due to their As such, this deep dive aims to provide practical insights that will help SMEs in Indonesia move towards improvement to financial reporting whilst instilling better compliance with tax laws.
Literature highlights a growing interest in the transformative potential of digital technologies, particularly in accounting and taxation (Wu & Kao, 2.
, (Gnatiuk et al.
, 2.
, (Gosal.
However, while considerable advancements have been made in understanding the individual impacts of DA and DT, more research is still needed, focusing on their integrated effects, especially within the context of Indonesian SMEs.
Existing studies primarily examine either the benefits of DA in enhancing FRQ or the efficacy of DT in improving TC.
However, studies have yet to explore how these two digital domains synergistically interact to influence financial transparency and regulatory compliance in SME settings.
This study bridges the gap by examining the combined effects of DA and DT on FRQ and TC among Indonesian SMEs.
By addressing this gap, the research contributes fresh insights into the comprehensive advantages of digital integration for SMEs, informing policy and practice for digital adoption strategies within the Indonesian business context.
Kontigensi: Jurnal Ilmiah Manajemen Management Science Doctoral Program.
Pasundan University.
Bandung.
Indonesia https://creativecommons.
org/licenses/by-nc/4.
Kontigensi: Jurnal Ilmiah Manajemen Vol.
No.
June 2025, pp.
ISSN 2088-4877
This study is distinctive in that it investigates the combined impacts of DA and DT on FRQ and TC within Indonesian SMEs.
While digital transformed accounting and tax administration globally, their joint effect on SMEs in emerging economies like Indonesia still needs to be explored.
This study addresses this gap by investigating how DA systems enhance financial reporting accuracy and reliability while DT frameworks improve TC through automation and The research seeks to clarify the combined consequences of these interactions, enhance theoretical comprehension, and offer practical benefits for practitioners, policymakers, and academicians who promote digital SME Furthermore, integrated approach underscores its transparency, regulatory adherence, and economic resilience in Indonesia's SME landscape.
TC is crucial for social and economic development as it helps minimize government fiscal deficits, reduce public debt, and generate essential funds for infrastructure projects (Mpofu, 2.
Educating the public on TC, reducing tax gaps, conducting effective audits, and imposing penalties for evaders are key strategies to promote compliance (Shubailat.
Al-Zaqeba.
Madi.
, & Khairi, 2.
Effective TC is essential for government revenue, improving quality of life through enhanced public services (Jimenez & Iyer, n.
The importance of TC extends beyond revenue collection, as it significantly influences social and economic development by ensuring communal benefits (Mascagni & Nell.
DA systems have been shown to significantly impact the effectiveness of strategic decisions, the usefulness of accounting information, and the FRQ (Yang et al.
, n.
These systems also improving efficiency and accuracy, which leads to cost savings and higher customer satisfaction (X.
Chen et al.
Implementing DA systems enhances the precision of data and customs ports' sustainability and effectiveness (Shubailat.
AlZaqeba.
Madi.
, & Khairi.
Furthermore, adopting DA systems facilitates the integration of sustainability metrics into financial reporting, allowing companies to evaluate better and communicate their aligning financial and sustainability objectives (Dharmayanti et al.
, n.
procedures, improve the timeliness of report generation, and boost the FRQ of banks (Zhang et al.
, n.
), reduce financial fraud (Jiang et al.
, n.
FRQ
(Odunayo.
Additionally, using DA systems has enhanced financial reporting efficiency and accuracy, crucial in improving transparency and FRQ (Gao, n.
H1: DA has a positive significant impact on FRQ.
The implementation of digital technology has had beneficial impacts sustainability, offering vital insights for customs agencies and businesses.
The digital divide reduces financial market Kontigensi: Jurnal Ilmiah Manajemen Management Science Doctoral Program.
Pasundan University.
Bandung.
Indonesia https://creativecommons.
org/licenses/by-nc/4.
Kontigensi: Jurnal Ilmiah Manajemen Vol.
No.
June 2025, pp.
ISSN 2088-4877
Financial inclusion and digital payments improve revenue report quality (Li & Shen, n.
Digital financial adoption is essential for MSMEs to save and streamline financial performance (Pyrez & Rodryguez, n.
Digitalized accounting information MSME productivity (Sannajust & Vallet, n.
and digital finance development enhances financial reporting and corporate value (Huang et al.
, n.
Digital management impacts industrial enterprises' financial risks with mixed outcomes (Sannajust & Vallet, n.
has become crucial as economies digitalize globally.
Research has also shown that DT and enhanced knowledge are vital for modern economies (Y.
Chen & Liu, n.
improves the effectiveness of customs environmental responsibility by using automation to conduct compliance inspections and simplify tax processes (Shubailat.
Al-Zaqeba.
Madi.
, & Khairi, 2.
The COVID-19 outbreak made the importance of electronic financial inclusion in making economies stronger stand out (Dluhopolskyi et al.
, n.
(Pyrez & Rodryguez, n.
Linking financial reporting to taxation helps management (Y.
Chen & Liu, n.
shapes TC, financial transparency, and systemic performance (Huang et al.
(Qiao et al.
, n.
) emphasize the critical role of legal frameworks and TC in the digital economy.
They suggest technological innovation, and adaptive regulatory frameworks are essential for promoting a fair, sustainable tax system.
A supportive legal environment helps SMEs FRQ.
Integrating advanced DT systems ensures more accurate and timely financial data, reduces errors, and increases transparency, ultimately improving FRQ (Gao & Ren, n.
), (AlOkaily et al.
, n.
H2: DT has a positive significant impact on FRQ.
The precision with which activities, namely its anticipated ash shareholders (Monteiro et al.
, n.
The FRQ is assessed based on standards that include understandability, relevance, consistency (Goodwin et al.
, n.
(Rakhman & Wijayana, n.
Highquality financial reports provide transparency in operations and financial performance, which can positively impact TC.
When SME owners have more excellent tax knowledge, they tend to exhibit higher TC behavior compared to those with less tax knowledge (Susilawati, n.
The study showed that the FRQ post-audit, which enhances the trust of report users and other stakeholders, ultimately leading to increased TC (Kasper & Rablen, n.
Research indicates that implementing international standard certifications enhances the FRQ for Vietnamese SMEs, leading to increased TC.
This improvement is driven by greater adherence to formal accounting practices, which boosts FRQ and reduces the risk of bribery and tax fraud (Duy & Tran, n.
Therefore.
FRQ is crucial in enhancing TC among businesses, particularly SMEs.
Kontigensi: Jurnal Ilmiah Manajemen Management Science Doctoral Program.
Pasundan University.
Bandung.
Indonesia https://creativecommons.
org/licenses/by-nc/4.
Kontigensi: Jurnal Ilmiah Manajemen Vol.
No.
June 2025, pp.
ISSN 2088-4877
H3: FRQ has a positive significant impact on TC.
Digitalizing is essential in modern business operations, offering various benefits that significantly impact financial management and A study in Ethiopia found that introducing ICTs and digitized data management systems significantly improves TC by increasing reported tax revenue, as evidenced by a 12% increase in income taxes and a 48% increase in VAT (Mascagni Transitioning from paper to digital billing significantly improves TC and operational efficiency.
In Peru, this shift resulted in over a 5% increase in reported sales and VAT liabilities within the first year, benefiting small noncompliant sectors.
Digital billing systems, like e-invoicing, are essential for enhancing revenue collection (Bellon et al.
, n.
(Ouyang et al.
, n.
) claimed that the adoption of DA significantly benefits small businesses' entire performance, specifically in relation to their TC.
An analysis of the national tax study dataset and the Peking University digital finance index has shown that a one standard deviation improvement in the digital finance index can lead to a 5% reduction in tax noncompliance.
By overcoming funding constraints and accessing digital tax data, digital finance simplifies compliance.
The study conducted by (Hang et al.
, n.
highlights that using DA apps decreases errors, ensures the accuracy and timeliness of accounting records, and effectively handles fraudulent actions in SMEs.
The study verified that DA substantially affects TC and optimizes long-term advantages.
H4: DA has a positive significant impact on TC.
DT manages and streamlines tax processes using digital technology and DT comprises electronic tax filing, payment, reporting technologies, and data analytics to improve TC and enforcement (Shubailat.
AlZaqeba.
Madi.
, & Khairi.
Integrating DA infrastructure and data technology within the government sector can impact public organizations' economic and political This can lead to changes in accounting practices and adopting new organizational techniques (Alsharari & Ikem, n.
(Ponomareva, n.
) asserted that the implementation of DT leads to a decrease in expenses associated with adhering to regulations, enhances operational effectiveness, precision, and occurrence of tax evasion.
Integrating digital tools and technologies into tax administration systems has improved taxpayer compliance behavior.
Tax digitization can optimize tax procedures, improve visibility and durability, and diminish tax avoidance (Wang & Hausken, n.
compliance checks, optimizing taxrelated processes, and enhancing data accuracy.
DT has the potential to (Belahouaoui, (Jin et al.
, n.
) argued that in the digital economy, the significance of platform data quality cannot be overstated, particularly in the context of TC.
Integrating DT technologies can improve voluntary TC by simplifying tax processes and fostering confidence in the tax system.
H5: DT has a positive significant impact on TC.
Kontigensi: Jurnal Ilmiah Manajemen Management Science Doctoral Program.
Pasundan University.
Bandung.
Indonesia https://creativecommons.
org/licenses/by-nc/4.
Kontigensi: Jurnal Ilmiah Manajemen Vol.
No.
June 2025, pp.
ISSN 2088-4877
DA systems have revolutionized traditional accounting routines by improving financial data's accuracy, efficiency, and availability through sophisticated software and cloud-based solutions (Gnatiuk et al.
, 2.
These systems automate routine tasks, reduce human errors, and facilitate real-time data processing, leading to higherquality financial reports.
Similarly.
DT systems streamline tax processes, improve compliance, and reduce errors through automation and real-time reporting (Catubig, 2.
Integrating these systems creates a cohesive and environment, ensuring that financial reports are timely and accurate, essential for regulatory compliance (Gao & Ren, n.
DT systems improve FRQ by automating compliance assurances and tax-related transparency (Al-Okaily et al.
, n.
technology has also enhanced customs achievement of sustainability objectives by automating compliance checks and simplifying tax procedures (Shubailat, .
Al-Zaqeba.
Madi.
, &
Khairi, 2.
This ensures that financial reports contain precise and current tax Supporting evidence highlights the significant impact of FRQ on TC.
High-quality financial reports provide operational and financial performance transparency, positively impacting TC (Kasper & Rablen, n.
SME owners with excellent tax knowledge and access to accurate financial information tend to exhibit higher TC behavior (Susilawati.
Adopting international standards certification enhances FRQ for SMEs, leading to improved TC (Duy & Tran, ), driven by increased engagement in formal accounting practices, reducing errors and tax evasion.
Integrating DA and DT systems allows SMEs to improve FRQ and achieve better TC.
These digital solutions ensure more accurate financial reporting, reduce errors, and increase transparency, fostering a compliant and transparent business environment.
High-quality characterized by relevance, reliability, (Goodwin et al.
, n.
), are crucial for decision-making including investors, creditors, and tax Research indicates that significantly impact the effectiveness of strategic decisions and the usefulness of accounting information (Yang et al.
The implementation of enhanced FRQ, with the assistance of DA, improves the level of openness and accountability inside the organization.
This, in turn, promotes confidence among stakeholders.
For that purpose, transparency is crucial for advocating for TC, as stakeholders depend on precise financial reporting to make wellinformed decisions and guarantee that the organization fulfills its tax obligations (Gao, n.
The mediating role of FRQ is crucial in linking DA and DT to TC.
High-quality financial reports provide a transparent and accurate representation of an organization's financial activities, which is essential for effective TC.
systems enhance FRQ by improving timeliness, fostering TC through transparency and accountability.
systems ensure that financial reports are Kontigensi: Jurnal Ilmiah Manajemen Management Science Doctoral Program.
Pasundan University.
Bandung.
Indonesia https://creativecommons.
org/licenses/by-nc/4.
Kontigensi: Jurnal Ilmiah Manajemen Vol.
No.
June 2025, pp.
ISSN 2088-4877
likelihood of tax evasion, which promotes TC.
H6: FRQ significantly mediates the influence of DA on FRQ.
H7: FRQ significantly mediates the influence of DT on FRQ.
METHODS
DA refers to adopting and integrating digital technologies and software applications within an organization's accounting processes.
This includes utilizing computerized systems, cloud-based platforms, and advanced data analytics tools to streamline, automate, and enhance efficiency, reliability, record-keeping, reporting, and compliance activities (Gnatiuk et al.
, 2.
DA facilitates realtime financial monitoring, improves data accuracy, and supports better decision-making adherence, ultimately contributing to the overall financial health of an organization (Gao & Ren, n.
The measurement of DA in this study is based on the frameworks provided by (Alsharari & Ikem, n.
) and (Shubailat, .
Al-Zaqeba.
Madi.
, &
Khairi, 2.
The evaluation of DA utilizes a five-point Likert scale consisting of six question items.
The response answer ranges from 1 to 5, from completely disagree to completely DT involves using digital streamline tax-related processes.
This systems for tax filing, payment, and reporting and leveraging data analytics to improve TC and enforcement (Catubig, 2.
The main goal of DT is to enhance the efficiency, accuracy, and transparency of tax administration while reducing the expenses related to compliance and mitigating the risk of tax evasion.
Through digital tools, governments and businesses can establish a tax system that is both more efficient and fair, as supported by research conducted by (Shubailat.
Al-Zaqeba.
Madi.
, &
Khairi, 2.
and (Gao & Ren, n.
), the study measures the implementation of DT using methodologies outlined by (Y.
Chen & Liu, n.
The evaluation of DT utilizes a five-point Likert scale of six question items.
The response answer ranges from 1 to 5, from completely disagree to completely agree.
FRQ pertains to how financial statements effectively and openly depict an organization's financial performance and condition.
It encompasses several relevance, completeness, comparability, and transparency (Kasper & Rablen, ), (Rakhman & Wijayana, n.
High-quality financial reports offer creditors, and regulators clear and reliable information, aiding in informed decision-making (Susilawati, n.
This FRQ methodologies from (Rakhman & Wijayana, n.
) and (Ozer et al.
, n.
The assessment of FRQ utilizes a sevenpoint Likert scale consisting of eight question items.
The response answer ranges from 1 to 7, which is from completely disagree to completely The scale provides a detailed measure essential for capturing reliability, and transparency in financial TC refers to the degree to which taxpayers conform to tax laws and regulations by precisely disclosing their income, accurately determining their tax obligations, and promptly settling Kontigensi: Jurnal Ilmiah Manajemen Management Science Doctoral Program.
Pasundan University.
Bandung.
Indonesia https://creativecommons.
org/licenses/by-nc/4.
Kontigensi: Jurnal Ilmiah Manajemen Vol.
No.
June 2025, pp.
ISSN 2088-4877
their tax dues.
High levels of TC indicate that taxpayers are fulfilling contributing to the effective functioning of the tax system (Jimenez & Iyer, n.
TC involves voluntary compliance, where taxpayers willingly fulfill their tax duties, and enforced compliance, where regulatory mechanisms ensure adherence to tax laws (Belahouaoui, 2.
, (Mascagni et al.
, n.
The measurement of TC in this study follows the methodologies used by (Hikmah, n.
) and (Belahouaoui, 2.
The assessment of TC utilizes a fivepoint Likert scale consisting of six question items.
The response answer ranges from 1 to 5, which is from completely disagree to completely Table 1.
The measurement and construction indicators model displays each question item pertaining to the fundamental study parameter.
This study utilizes a quantitative analysis method using a survey-based The study's population comprises accountants and managers employed in SMEs in Indonesia.
These individuals are assumed to possess a superior comprehension of the practice or execution associated with the pertinent factors examined in this study.
The data was gathered through a combination of online and offline The questionnaire assessed each variable, and the data collection spanned from February to June 2024.
The WhatsApp by sharing a research questionnaire hyperlink, while the This study posits no comprehension of the research variables between accountants and managers.
order to validate this assumption, a ttest was performed, revealing no statistically significant disparity in comprehension understanding between the two groups .
ith a level of significance of A > 0.
In the initial phase, 610 resulting in the collection of 126 In the second stage, 81 more responses were received.
This resulted in 207 appropriate responses for analysis, equivalent to a response rate of In addition, the study examined whether there were any disparities in the comprehension of the research variables between the initial and subsequent responses.
The t-test results indicated no statistically important difference among the two sections, with a significance level of A > 0.
Among the 207 participants, 166 were male .
19%) and 41 were female .
81%).
Regarding work experience, 96 participants .
38%) had 0-5 years, 64 participants .
92%) had 6-10 years, and 47 participants .
70%) had more than ten years of experience.
The majority of participants worked in companies with more than 30 employees .
participants, 46.
38%),
followed by those in companies with 1630 employees .
participants, 42.
and those in companies with 0-15 employees .
participants, 11.
11%).
Professionally, .
26%) were accountants, and 45 .
74%) were managers.
Regarding educational level, 9 participants .
had completed high school, 44 participants .
26%) had obtained a diploma, 129 individuals .
32%) had earned a degree from a university .
, and 25 participants .
held a master's degree or higher.
Kontigensi: Jurnal Ilmiah Manajemen Management Science Doctoral Program.
Pasundan University.
Bandung.
Indonesia https://creativecommons.
org/licenses/by-nc/4.
Kontigensi: Jurnal Ilmiah Manajemen Vol.
No.
June 2025, pp.
ISSN 2088-4877
Figure 1 graphically illustrates the distribution of participants based on demographic factors.
The thorough demographic analysis guarantees the robustness and relevance of the study's findings, providing valuable insights into the perspectives of professionals actively involved in the SME sector in Indonesia.
The inclusion of a wide range of demographic groups and the implementation of rigorous statistical testing guarantee the accuracy and reliability of the collected data and the resulting findings.
Table 1 presents data regarding each indicator's averages, variations, and factor loadings.
In addition, the table provides information on the overall reliability and Cronbach's Alpha for every variable.
The analysis of the DA construct yielded robust results, confirming its reliability and validity.
All FL surpassed the critical limit of 70, underscoring strong convergent validity, indicating that the indicators reliably measure the DA construct.
The average variance extracted (AVE) for the DA component was 0.
607, which exceeded the permissible threshold of This demonstrates that the DA structure explains more than 50% of the variability in its indicators, affirming its effectiveness in capturing the relevant Figure 1.
Participants Profile Furthermore, the DA construct validity, significant explanatory power, demonstrated strong consistency and and high reliability, validating its reliability, as proven by a Cronbach's robustness in capturing the essence of Alpha coefficient of 0.
907 and a DA metrics.
composite reliability coefficient of 0.
All FL for the DT indicators Both values significantly exceed the surpassed the critical limit of 0.
threshold of 0.
70, reflecting excellent reliability and internal consistency.
validity, indicating that the indicators are robust measures of the DT construct.
The AVE for DT is 0.
558, surpassing the Kontigensi: Jurnal Ilmiah Manajemen Management Science Doctoral Program.
Pasundan University.
Bandung.
Indonesia https://creativecommons.
org/licenses/by-nc/4.
Kontigensi: Jurnal Ilmiah Manajemen Vol.
No.
June 2025, pp.
ISSN 2088-4877
acceptable threshold of 0.
This reliability metrics suggest that the FRQ suggests that the DT construct construct is consistently measured effectively encompasses the key across different items.
attributes of DT, as it explains a All FL for the TC indicators are substantial portion of the variability in 70, demonstrating good its indicators.
In addition, the DT convergent validity.
This suggests that structure's dependability is confirmed each indicator is a robust measure of the by a Cronbach's Alpha coefficient of TC construct.
The mean value of TC is 883 and a composite reliability 584, surpassing the recommended coefficient of 0.
Both results surpass criterion of 0.
50, indicating that the TC the necessary threshold of 0.
construct effectively captures the fundamental characteristics of TC by consistency and dependability.
The explaining a substantial portion of the high scores indicate that the DT variability in its indicators, thereby structure is consistently measured demonstrating its efficacy.
Moreover, across several objects and is dependable the TC construct's reliability is for further study.
supported by a Cronbach's Alpha All FL for the FRQ were above coefficient of 0.
894 and an overall 70, indicating good convergent reliability of 0.
Both metrics surpass validity, suggesting that the indicators the acceptable threshold of 0.
are strong measures of the FRQ The AVE of the FRQ is 0.
reliability and consistency level.
which exceeds the minimal value of The constructs in this study (DA, 50, suggesting that the FRQ construct DT.
FRQ, and TC) show good validity accounts for a substantial amount of and reliability.
High FL across all items variability in its indicators, confirming confirms strong convergent validity.
its efficacy in capturing the pertinent AVE values above 0.
50 indicate that components of FRQ.
The dependability each construct captures a substantial of the FRQ construct is confirmed by a The elevated values of Cronbach's Alpha coefficient of 0.
composite reliability and Cronbach's and a composite reliability coefficient of Alpha for every structure demonstrate Both values are well above the the evaluation models' strong reliability and internal consistency, affirming their robustness and dependability.
consistency and reliability.
These highTable 1.
Model for measurement and construction indicators Indicators/ Items Code
Mean
AVE
Adoption of DA
DA1
Efficiency of DA2 Accuracy of DA3 financial data Kontigensi: Jurnal Ilmiah Manajemen Management Science Doctoral Program.
Pasundan University.
Bandung.
Indonesia https://creativecommons.
org/licenses/by-nc/4.
Kontigensi: Jurnal Ilmiah Manajemen Vol.
No.
June 2025, pp.
ISSN 2088-4877
Real-time Reducing the time
Compliance with Adoption of digital tax filing Efficiency of TC
Accuracy of tax
Ease of tax
Real-time tax
Reduction of tax
FRQ
Accuracy of Reliability of Relevance of Completeness of financial report
Comparability over time
Transparency of Comply with the Free from material DA4
DA5
DA6
DT1
DT2
DT3
DT4
DT5
DT6
FRQ1
FRQ2
FRQ3
FRQ4
FRQ5
FRQ6
FRQ7
FRQ8
Kontigensi: Jurnal Ilmiah Manajemen Management Science Doctoral Program.
Pasundan University.
Bandung.
Indonesia https://creativecommons.
org/licenses/by-nc/4.
Kontigensi: Jurnal Ilmiah Manajemen Vol.
No.
June 2025, pp.
ISSN 2088-4877
Accuracy in tax
TC1
Timeliness of tax
TC2
Understanding of TC3 tax obligations Record-keeping TC4 for tax purposes Use of TC5 0,661 0.
professional tax
Response to tax
TC6
audits and A = Composite Reliability, = CronbachAos Alpha
RESULT AND DISCUSSION
779, 0.
showed the AVE's square Figure 2 displays the structural root for every structure.
In order to model's outcomes, emphasizing DA, confirm discriminant validity, these DT.
FRQ, and TC connections.
The numbers should be bigger than the analysis offers valuable information values not on the line in the same regarding the direct and indirect column and row.
The correlations impacts of DA and DT on TC, which between constructs, such as the 0.
FRQ facilitated.
The results from Figure correlation between DA and DT and the 2 supported the reliability measures 692 correlation between FRQ and TC, detailed in Table 1.
All DA.
DT.
FRQ, indicated how strongly they were and TC measurement items exhibit FL The discriminant validity of the larger than 0.
The AVE values for all constructs was proven when the square constructions above the 0.
50 threshold root of AVE for each construct was higher than the correlation values High values for both and A between the structures, showing that across constructs confirm the internal they are distinct.
There was good discriminant validity if all of the square strong item reliability and validity roots of AVE were higher than their (Table .
Figure 2 also described the RA corresponding relationships with other value for FRQ as 0.
566, meaning that All HTMT values .
umbers DA and DT collectively account for above the vertica.
were less than 0.
6% of the variance in FRQ.
which supports the discriminant Furthermore, the RA value for TC each construct meets the indicates that DA.
DT, and FRQ HTMT requirement of less than 0.
together explain 72.
8% of the variance in The table and figure showed that the TC.
constructs were true and reliable, which Table 2 displays the correlations and the construct discriminant validity.
measurement model used in the study.
The diagonal numbers .
798, 0.
Kontigensi: Jurnal Ilmiah Manajemen Management Science Doctoral Program.
Pasundan University.
Bandung.
Indonesia https://creativecommons.
org/licenses/by-nc/4.
Kontigensi: Jurnal Ilmiah Manajemen Vol.
No.
June 2025, pp.
ISSN 2088-4877
Figure 2.
Structural Model Result The structural model's findings sample predictive power.
The f-squared reported in Table 3 indicated that it was values, which assess the effect size, effective and has strong predictive indicated that both DA and DT The R-squared value for contributed meaningfully to explaining FRQ, which was 0.
566, and TC, which the variance in FRQ and TC, ensuring 728, showed that the model that the constructs were not only predicts a large amount of variation in statistically significant but also had a these concepts.
The adjusted R-squared substantial impact.
The Variance values further suggest low overfitting.
Inflation Factor and the model has strong explanatory consistently beneath the widely The Q-squared values for FRQ accepted criterion of 5, indicating that .
and TC .
further affirm the multicollinearity does not undermine the accuracy of the model's estimates.
suggesting that it has substantial out-ofTable 2.
Correlations and discriminant validity Construct
FRQ
0,545
0,488
0,565
0,499
0,547
FRQ
0,481
Note: The AVE square roots are shown by diagonal and bold numbers Finally, the adequacy of the implications of digital tools in model was assessed by calculating the enhancing FRQ and TC among SMEs.
Normed Fit Index and Standardized This model not only supports the Root Mean Square Residual.
Both of theoretical propositions but also these metrics collectively highlight the provides a solid basis for practical Kontigensi: Jurnal Ilmiah Manajemen Management Science Doctoral Program.
Pasundan University.
Bandung.
Indonesia https://creativecommons.
org/licenses/by-nc/4.
Kontigensi: Jurnal Ilmiah Manajemen Vol.
No.
June 2025, pp.
ISSN 2088-4877
implementations aimed at digital integration within financial systems.
Table 3.
Structural model Constructs Adj.
FRQ
Table 4 of the Full Relationships Testing Results offers insights into the direct and indirect effects of DA.
DT.
FRQ, and TC as a constructed research The direct effects indicated a significant relationship where DA positively impacts FRQ with a p-value 000 and coefficient () of 0.
highlighting that DA practices robustly enhance the FRQ.
Similarly, the p-value 000 and coefficient of 0.
indicated that DT had a significant positive impact on FRQ, suggesting that DT systems had an even greater influence on improving FRQ.
The results emphasized the substantial influence of digital advancements in accounting and taxation on enhancing openness, accuracy, and the general quality of financial reporting.
Moreover, the FRQ variable had an advantageous effect over the TC, as indicated by a coefficient of 0.
127 and a p-value of These values suggested a statistically significant but rather moderate effect.
This has shown that contributed to improving TC, likely due to better transparency and reliability of financial information, which aids in accurate tax reporting and adherence.
Utilizing DA can significantly improve the effectiveness of TC, as indicated by a p-value of 0.
000 and a VIF
SRMR
NFI
coefficient of 0.
The results demonstrated a robust and direct relationship between DA practices and TC.
The coefficient of 0.
333 and p-value 000 implied that DT had a substantial positive influence on TC.
This suggests that DT systems increase TC by increasing efficiency and accuracy in tax processes.
The examination of indirect impacts through the mediating role of FRQ showed mixed results.
The statistical study had shown that there was not enough evidence to support the pathway from DA through FRQ to TC, with a p-value of 0.
This has suggested that the mediating role of FRQ did not significantly influence DA on TC.
In contrast, the statistical analysis showed that the pathway from DT through FRQ to TC was supported with a significance level of 0.
suggesting a marginally significant mediation effect.
This finding suggested that the FRQ influences how DT affects TC, albeit this influence is not as direct as other pathways.
Each understanding the multifaceted impacts of digital tools on financial management and compliance in SMEs.
The robust transformation potential of digital tools Kontigensi: Jurnal Ilmiah Manajemen Management Science Doctoral Program.
Pasundan University.
Bandung.
Indonesia https://creativecommons.
org/licenses/by-nc/4.
Kontigensi: Jurnal Ilmiah Manajemen Vol.
No.
June 2025, pp.
ISSN 2088-4877
In contrast, the mixed investigation to elucidate the dynamics indirect effects suggest complex at playfully.
interdependencies that warrant further Table 4.
Full relationship testing result Path Coef.
95% BCa CI P-Values Concl.
DA -> FRQ
353, 0.
DT -> FRQ
408, 0.
FRQ -> TC
176, 0.
064 **
DA -> TC
399, 0.
DT -> TC
339, 0.
DA -> FRQ-> TC 0.
113, 0.
159 ns DT -> FRQ-> TC 0.
114, 0.
*,** The results are significant at the 1% and 10% levels, correspondingly The findings of this study This outcome corroborates the research provided an important enhancement to by (Kasper & Rablen, n.
), indicating our comprehension of the influence of that high-quality financial reports DA and DT systems on FRQ and TC in improve TC by providing more precise Indonesian SMEs.
The finding revealed and reliable financial information that a strong and favorable correlation aids accurate tax filing.
The direct between DA and FRQ ( = 0.
361, p = relationship between DA and TC was This conclusion aligns with the strongly significant ( = 0.
464, p = results of (Yang et al.
, n.
), who showed .
, suggesting that DA not only that DA systems enhance the accuracy improves reporting quality but also and timeliness of financial reports.
This directly enhances compliance.
The corroborates the theoretical standpoint study conducted by (Mascagni et al.
that the incorporation of technology in ) confirmed the notion that digital systems enhance compliance by management of data and production of improving reporting accuracy.
The reports, thus augmenting the quality of positive effect of DT on TC ( = 0.
333, p Furthermore, the hypothesis = 0.
confirms that digital tax that DT has a beneficial impact on FRQ systems directly facilitate better ( = 0.
435, p = 0.
is also confirmed.
compliance, aligning with findings from This finding aligns with the research (Shubailat.
Al-Zaqeba.
conducted by (Li & Shen, n.
), who Madi.
, & Khairi, 2.
, which observed that DT systems enhance FRQ emphasized the significance of digital by promoting accuracy and reducing tools in simplifying tax processes and The higher beta value compared improving compliance.
to DA suggests that DT might have a The analysis of Hypothesis 6 slightly more substantial influence on indicated that the involvement of FRQ FRQ among SMEs, possibly due to the as a mediator in the connection between direct role of taxation systems in DA and TC was not statistically financial data processing and reporting.
= 0.
, indicating that The positive influence of FRQ on DA influences TC directly rather than TC ( = 0.
127, p = 0.
, although through improvements in FRQ.
This significant, showed a smaller effect size.
finding is somewhat contrary to the Kontigensi: Jurnal Ilmiah Manajemen Management Science Doctoral Program.
Pasundan University.
Bandung.
Indonesia https://creativecommons.
org/licenses/by-nc/4.
Kontigensi: Jurnal Ilmiah Manajemen Vol.
No.
June 2025, pp.
ISSN 2088-4877
expectations based research, such as the study by (Yang et , n.
), which suggested that improvements in FRQ due to DA systems would lead to better The lack of a mediating effect, in this case, might suggest that transparency and accuracy brought about by DA tools are sufficient to influence TC independently of the overall improvements in report quality.
Theoretically, challenges the assumption that the FRQ is the primary pathway through which DA impacts TC.
It suggests that other mechanisms, possibly related to the direct accessibility and reliability of digital records or enhanced ease of compliance through digital systems, may play more critical roles.
For practitioners, particularly in SMEs, this indicates that investments in DA compliance benefits without significant intermediate improvements in the FRQ.
This could prioritize certain types of DA innovationsAithose compliance features rather than those solely aimed at enhancing traditional reporting qualities.
In contrast.
Hypothesis 7 was supported .
= 0.
, indicating that FRQ does mediate the relationship between DT and TC.
These results support the conclusions of (Shubailat, .
Al-Zaqeba.
Madi.
, &
Khairi, 2.
, who claimed that DT systems improve TC by enhancing the FRQ, resulting in more reliable and transparent reports, which in turn promote higher compliance.
The underscores the importance of FRQ as a conduit through which DT affects TC.
This result reinforces the theoretical framework positing that the FRQ is a crucial intermediary in realizing the full benefits of DT systems on TC.
It highlights the necessity of robust financial reporting systems to maximize the effectiveness of DT From perspective, policymakers and business leaders should not only focus on implementing DT instruments but also on improving the systems that produce Training resources should be allocated to processes to ensure that the benefits of DT are fully realized in terms of CONCLUSION This study demonstrates that DA and DT significantly enhance the FRQ and TC among Indonesian SMEs.
The findings confirm the direct positive impacts of DA on both FRQ and TC, demonstrating the profound impact of digital tools in simplifying the accounting process and enhancing direct compliance.
Furthermore.
DT improves FRQ and, through improved TC, underscoring the critical role of exemplary financial reporting as a mediator in the pathway from digital innovations to compliance outcomes.
These results highlight the significant benefits that digital tools confer on the financial management processes within SMEs, emphasizing the importance of adopting such technologies to leverage their full potential in improving business operations and compliance.
The uniqueness of this research resides in its investigation of the dual pathways through which digital technologies impact TC in SMEsAi Kontigensi: Jurnal Ilmiah Manajemen Management Science Doctoral Program.
Pasundan University.
Bandung.
Indonesia https://creativecommons.
org/licenses/by-nc/4.
Kontigensi: Jurnal Ilmiah Manajemen Vol.
No.
June 2025, pp.
ISSN 2088-4877
enhancements and indirectly through improved financial reporting.
This study contributes to the existing knowledge by providing empirical evidence of the specific benefits of integrating digital technology into accounting and taxation processes in SMEs, an area that requires more This study enhances theoretical understanding and provides practical insights for small and SMEs and regulators.
it emphasizes the significance of customized digital Understanding this twopronged approach is essential for creating focused interventions that maximize the advantages of digital effectiveness and reliability of financial and tax management processes in small and SMEs.
Further research in this area should explore additional mediators and moderators that could influence the relationship between DA and DT and their impacts on FRQ and TC.
The current study highlights a direct impact of DA on TC and a mediated impact of DT on TC through FRQ, suggesting different pathways for how digital Future studies could examine other potential mediators, such as organizational culture, technological readiness, or external environmental factors like regulatory changes or economic conditions, which affect how effectively these digital tools are implemented and their subsequent Furthermore, influence of moderators such as the size of the organization, the kind of industry, or the geographic location could offer important insights into the contextual elements that either increase or limit the success of DA and DT systems in enhancing FRQ and TC.
Another promising avenue for further research involves longitudinal studies to assess the long-term effects of DA and taxation systems on SMEs.
This approach would enable researchers to monitor and analyze changes occurring over some time, so offering a more dynamic perspective on the effects of digital transformation.
It also helps in understanding whether the benefits of digital integration in accounting and taxation are sustained over the long term or if they diminish as the novelty wears off or as new challenges emerge.
Moreover, comparative studies between regulatory environments could shed light on how varying external conditions influence the effectiveness of digital systems.
Such studies would not only broaden the understanding of digital tools in financial strategy but also guide international policy-making and strategy development for fostering digital transformations across different economic landscapes.
REFERENCES