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Jurnal Economia, 15(1), April 2019, 96-113
96
Intergenerational Perceptions of Coercive and Legitimate Power
Elisa Tjondro1, Joscelind Setiabudi2, Alexandro Christian Joyo3
1,2,3Universitas Kristen Petra, Indonesia
1elisatjondro@petra.ac.id, 2joscelind13@gmail.com, 3alexandro.christian@yahoo.com
Abstract
This is the first research to examine the perception of the coercive and legitimate power of tax
authority between three generations, namely Millennials, X and Baby Boomers. Method of data
collection used a survey with a total sample of 120 taxpayers from two types of business,
retail/production and services/professions in five major cities in Indonesia (Jakarta, Surabaya,
Bandung, Semarang, and Denpasar). This survey was held in 2018. This study used a quota
sampling technique with Custom Factorial ANOVA as a statistical tool. We found Millennials and
X have a perception that Indonesia tax authority implemented coercive and legitimate power in
balance conditions. However, different perceptions found in Baby Boomers that thought of tax
authority had been implemented coercive power with more severe punishment. The study also
found differences in perceptions of vertical equity, horizontal equity, and exchange equity between
the generations.
Keywords: intergenerational, coercive power, legitimate power, vertical equity, horizontal equity,
exchange equity.
Persepsi Kekuatan Koersif dan Kekuatan Legitimasi Antargenerasi
Abstrak
Penelitian ini adalah penelitian pertama yang menguji persepsi kekuatan koersif dan kekuatan
legitimasi pada otoritas pajak antara tiga generasi, yaitu Millennials, X dan Baby Boomers.
Peristiwa yang terjadi selama periode tertentu mempengaruhi persepsi antar generasi. Metode
pengumpulan data menggunakan survei dengan total sampel 120 wajib pajak dari dua jenis bisnis,
ritel/produksi dan jasa/profesi di lima kota besar Indonesia (Jakarta, Surabaya, Bandung,
Semarang, dan Denpasar). Survei diadakan pada tahun 2018. Penelitian menggunakan teknik kuota
sampling dengan Custom Factorial ANOVA sebagai alat statistik. Hasil tes menemukan Milenial
dan X menilai bahwa otoritas pajak menerapkan kekuatan koersif dan kekuatan legitimasi dalam
kondisi seimbang. Namun, persepsi berbeda ditemukan pada Baby Boomers yang berpikir otoritas
pajak telah menerapkan kekuatan koersif dengan hukuman yang lebih berat kepada wajib pajak.
Studi ini juga menemukan adanya perbedaan persepsi terkait ekuitas vertikal, ekuitas horisontal,
dan pertukaran ekuitas antar generasi.
Kata kunci: antar generasi, kekuatan koersif, kekuatan legitimasi, ekuitas vertikal, ekuitas
horizontal, pertukaran ekuitas.
INTRODUCTION
Every generation that is born must have their enthusiasm. Mannheim became the first to
examine the development of generation values based on sociological writings about
generations in the 1920s and 1930s. In his research revealed that the individual social
awareness and perspective, from youth to reach maturity, influenced by the crucial events
that have passed. Since that time, many researchers have begun to examine differences in
values between generations by using the generation theory of Howe and Strauss and
generational cohort theory (Gentry, Griggs, Deal, Mondore, & Cox, 2011; Parry & Urwin,
2011; Jackson, Stoel, & Brantley, 2011; Brosdahl & Carpenter, 2011; Obal & Kunz, 2013).
The grouping of these generations is influenced by historical events and cultural phenomena
Jurnal Economia, Vol. 15, No. 1, April 2019, 96-113 P-ISSN: 1858-2648
Website: https://journal.uny.ac.id/index.php/economia E-ISSN: 2460-1152
Intergenerational Perceptions of Coercive and Legitimate Power (Tjondro, et.al.)
97
that occur in the phase of their lives (Noble & Schewe, 2003; Jackson et al., 2011), and these
events and phenomena cause the formation of collective memories that have an impact on
their lives (Dencker, Joshi, & Martocchio, 2008; Obal & Kunz, 2013). Therefore historical,
social, and cultural effects along with other factors will influence the formation of behavior,
values, and personality possessed by a person (Caspi & Roberts, 2001; Jurney, Rupert, &
Wartick, 2017). In our study, the generation group was divided into three groups (Jurney et
al., 2017), namely Millennials (born in 1980-2000), X (1965-1979), and Baby Boomers
(1945-1964).
Every group has a unique characteristic that shapes perception. The millennial
generation is characterized by technological advances and increasing global and economic
interactions that are developing very rapidly (Jurney et al., 2017). Millennials also had
attitudes that were more accepting of noncompliance than Baby Boomers and X (Jurney et
al., 2017). Furthermore, Lyons (2003) reveals the characteristics of the Millennial
generation, namely their communication patterns that are very open compared to previous
generations. Millennials oriented to success, creativity, freedom of information that is a
priority (Bencsik & Machova, 2016). Generation X is one of the most highly educated
generations (Jackson et al., 2011). Generation X is a generation born in the early days of
technological and information developments such as the emergence of PCs (personal
computers), video games, cable TV, and the internet. Generation X has little tolerance for
bureaucracy and rules, especially concerning time and attendance (Gursoy, Maier, & Chi,
2008). According to Jurkiewicz (2000), generation X is able to adapt, be able to accept
changes well and is called a strong generation, has independent and loyal character, highly
prioritizes image, fame and money, type of hard worker, and calculates the contribution
that the company has made to the results of his work. The Baby Boomer generation was
born in the early days of World War II and Indonesia’s Independence Day in 1945 and a
period where marriage rates were very high resulting in high birth rates. According to
(Bencsik & Machova, 2016), Baby Boomers are hard workers, profoundly respecting
tradition and hierarchy, different from Millennials who tend not to respect hierarchy and
tradition.
Ramli et al. (2018) suggested that perception may be influenced by two essential
steps of elements for response and elements of sensory experience. These beliefs and
perceptions are influenced by prior experience, judgments, knowledge and the education
and information efforts by policymakers (Kneeshaw, Vaske, Bright, & Absher, 2004). From
several previous studies, we concluded the past period when someone grew and developed,
involvement in technology, and responding to policymakers are the factors that influence
the perception of taxpayers in the present. This causes different perspectives or perceptions
of things between generations, one of which is the perception of the figures of the authority.
We argue that each generation has a different view regarding the use of coercive and
legitimate power in tax collection. Considering the characteristics of each generation, Baby
Boomers have respect for authority figures (Bencsik & Machova, 2016). The word respect
for authority figures can often cause fear to make mistakes or break the law. Therefore,
according to its characteristics, the Baby Boomer generation is more able to accept the
Jurnal Economia, 15(1), April 2019, 96-113
98
concept of coercive power from authority figures. Unlike the Baby Boomer, the Millennial
grew up in the era of rapidly developing technology. Lyons (2003) reveals that Millennials
have communication patterns that are more open than previous generations. This shows
that communication is vital for this generation. Thus, according to the characteristics of the
Millennial, they tend to be able to accept the legitimate power of authority figures. This is
because legitimate power is closely related to the service climate, which means more
attention to the provision of services (Hofmann, Hartl, Gangl, Hartner-Tiefenthaler, &
Kirchler, 2017). Service delivery is an effective way of communicating information, policies
and work programs of the tax authorities in more detail and clarity. The character of
generation X has little tolerance for bureaucracy and rules and fiercely independent
compared to the other groups (Gursoy et al., 2008). Generation X expects coercive and
legitimate power of authority figures to run in a balanced and concurrent manner. For them,
the exercise of power will be more effective if through strict sanctions accompanied by
excellent service.
The contribution of this research is the first study that examines the perception of
coercive and legitimate power between generations in the context of the tax authority. We
suspect that certain generations are more supportive of legitimate power than coercive
power in tax collection. Therefore it cannot be applied arbitrarily. As a result of excessive
coercive power, implementation will lead to rejection from specific generations,
increasingly massive tax evasion actions, and tax collection becomes ineffective. Second,
this study aims to prove that generation X expects the application of coercive and legitimate
power in a balanced manner by the DGT. There are several underlying reasons. First,
generation X prefer to blend traditional method with technological tools to enhance their
development opportunities because they enjoy the personalization and convenience offered
by technologies (Neal & Wellins, 2018). Second, generation X also refer to as the powerful
combination of digital and conventional leadership skill, who has a strong lead character's
view as in the perspective of the Baby Boomers but has the ability to carry out tasks digitally
like Millennials (Neal & Wellins, 2018).
We also examined the perception of tax fairness through three variables of horizontal
equity, vertical equity, and exchange equity that were tested in the research of Jurney et al.
(2017) and Efebera, Hayes, Hunton, & O’Neil (2015). Previous researchers have found that
perceptions regarding tax systems that are unfair will have an impact on taxpayers'
disobedience to the tax regulations. Research conducted by Andreoni, Erard, Feinstein,
Andreoni, & Feinstein (1998) found that when taxpayers consider themselves victims of
fiscal injustice, it will increase the amount of tax evasion. Similar to the study, Siahaan
(2005) found that perceptions regarding tax systems that were unfair would increase the
tendency of taxpayers to carry out tax avoidance.
In research conducted by Gangl, Hofmann, & Kirchler (2015) power is defined as
the capacity of an organization or person to influence the behavior of others. In general,
there are two possible reasons why people obey power holders. First, they want to avoid
penalties or sanctions they will pay if they violate the rules (Ariel, 2012). Second, there is a
division of roles between power holders (tax authority) and subordinates (taxpayers) that
Intergenerational Perceptions of Coercive and Legitimate Power (Tjondro, et.al.)
99
agreed by both parties. In this case, people consider the authority to be legitimate, and
therefore that power is based on the joint decision (Kastlunger, Lozza, Kirchler, &
Schabmann, 2013). There are two categories of power, namely "hard" power and "soft"
power. (Gangl et al., 2015) then used the term coercive power to define "hard" power and
legitimate power to define "soft" power.
Coercive power is the power of the tax authorities to force taxpayers to pay taxes
because they are afraid of tax audits and strict sanctions (Kastlunger et al., 2013). Whereas
in Gangl et al. (2015), coercive power is defined as the ability to detect and impose sanctions
against unlawful behavior. In other words, coercive power is the power that directs someone
against their will (Kirchler, Hoelzl, & Wahl, 2008). Coercive power or "hard" power is
realized through negative and positive approaches such as through the imposition of
sanctions and awarding (Raven, Schwarzwald, & Koslowsky, 1998). Negative approaches,
such as the imposition of fines and imprisonment, are common steps and are proved to be
effective to influence one's behavior, generally used by the tax authority. While a positive
approach, in the form of an appreciation for an honest Taxpayer, is something that is not
commonly used by tax authorities to influence a person's behavior (Becker, 1968). Being
confronted with coercive power, respondents immediately feel aversive arousal. They feel
anger, experience reactance, and show behavioral intentions to re-establish their freedom
(Sittenthaler, Steindl, & Jonas, 2015). Thus, people who deal with coercive power may
immediately feel their emotions boiling over. They are physiologically activated to “fight”
for their freedom (Sittenthaler et al., 2015).
Legitimate power is not based on pressure and strength but is based on legitimacy,
the provision of relevant information, authority knowledge and skills, and the capacity of
the tax authorities to make taxpayers identify specific policies with the authorized tax
authorities (Raven et al., 1998). In Gangl, Hofmann, Pollai, & Kirchler (2012) legitimate
power is defined as the legitimacy, knowledge, and ability of tax authorities that leads to
the efficacy of tax authorities in carrying out their work, and encourages the confidence of
taxpayers in the presence of tax authorities. Based on these studies, Kastlunger et al. (2013)
defined legitimate power as the efficacy of an authorized tax authority (because of its
expertise and ability) to ensure cooperation with taxpayers. Legitimate power is considered
high if tax crimes can be detected reasonably and the tax authorities can handle them
efficiently because of their competencies. According to (Gangl et al., 2015), legitimate
power is based on the fact that the authorized tax authorities mobilize legitimate forces to
convince taxpayers to work together using the legitimacy, charisma, expertise, and
information DGT have. Different from coercive power, legitimate restrictions may first be
followed by a delay followed by physiological arousal (Sittenthaler et al., 2015). People in
the legitimate condition seem to need some more time to recognize the unobvious authority
restriction. This could mean that people first have to reflect upon and argue against the
restriction before getting into the same arousal state as people of the coercive restriction
(Sittenthaler et al., 2015).
We defined authorities as processes to organize the cooperation in a community by
an assigned social position that allows to create and maintain environments and thereby
Jurnal Economia, 15(1), April 2019, 96-113
100
influence the behavior of individuals (Andringa, van den Bosch, & Vlaskamp, 2013). In
Indonesia, the tax power is in the hands of authority figures, namely the Directorate General
of Tax (DGT). However, the DGT has power under the Ministry of Finance of the Republic
of Indonesia to process tax disputes in the case of the objection process (Table 2). DGT also
has the authority to carry out tax collection activities through cooperation with police
agencies (Table 1). One of these tax collection activities is to carry out a hostage-taking
against taxpayers. This action was later known as gijzeling. Gijzeling is a temporary
restraint on the freedom of the taxpayer by placing him in a particular place, not imprisoned.
Hostage or gijzeling activity itself is one of a series of tax collection actions carried out by
DGT so that the taxpayers repay tax debt.
Table 1. Government policies on the power of DGT of Indonesia
DGT has the power to
decide tax disputes in the
case of the objection
process
Taxpayers can submit objections
only to the Director General of
Taxes (DGT) on the result of the
tax audit.
Article 25 number 1 Act of
The Republic of Indonesia
number 28 the year 2007
concerning General
Provision and Tax
Procedures
DGT has the power to
issue permits for tax
consultants
To be able to practice as a Tax
Consultant, a Tax Consultant
who has fulfilled the
requirements referred to in
Article 2, must have a Practice
Permit issued by the Director
General of Taxes or a designated
official.
Regulation of the Minister of
Finance No 111 / PMK.03 /
2014 article 3 number 1 about
Tax Consultant
DGT work with the Police
in terms of law enforcement
in the field of taxation
The Parties must provide
operational support and guidance
in the implementation of law
enforcement as requested based
on applicable laws and
regulations.
Memorandum of
Understanding between the
Ministry of Finance and the
Indonesian National Police
MOU-1 / MK.09 / 2012
Article 6 number 1
concerning law enforcement
in the field of taxation
Sources: Republic of Indonesia, (2007); Republic of Indonesia, (2014); Republic of Indonesia, (2012)
Indonesia government has already submitted the draft bill of KUP Law to parliament
as part of changes in DGTs organizational structure (Setiaji, 2018), which reveals the
government plans to separate the DGT from the Ministry of Finance. Later, the DGT will
become an autonomous body directly under the president even though he still coordinates
with the Ministry of Finance. Darussalam, Kristiaji, & Klise (2013) divided two variations
of the institutional framework, namely: the tax authority under the institutional structure of
the finance ministry and the tax authority which has broader autonomy. The institutional
framework changes at DGT organization will result in broader autonomy and the enormous
power of DGT.
Coercive power is effective when sufficient resources are needed to protect fraud
from regulation and the application of supported agreements (Becker, 1968; Mulder,
Verboon, & Cremer, 2009). In conditions where power is not found and is not eradicated,
Intergenerational Perceptions of Coercive and Legitimate Power (Tjondro, et.al.)
101
coercive power is perceived as weak, because the motives are enforced, the desires will
decrease (Hofmann et al., 2017). In conditions such as Indonesia with a ratio of tax officers
and residents is 1:7700 (Misbakhun, 2018) then the application of coercive force is not
effective.
Considering the characteristics of each generation, we argue that each generation
has a different view regarding the use of coercive and legitimate power in tax collection.
Millennials who live in a period of increasing global and economic interactions (Jurney et
al., 2017), have more attitudes to accept noncompliance (Jurney et al., 2017), has a more
open communication pattern (Lyons, 2003), freedom of information is a priority (Bencsik
& Machova, 2016), expect to be heard (Hartman & Mccambridge, 2011). We argue that
Millennials tend to prefer the application of legitimate power in tax collection. Millennials
tend to support the application of the concept of legitimate power by the tax authorities
because legitimate power is closely related to the service climate, which means more
attention to the provision of services (Hofmann et al., 2017). Millennials want cooperation
between DGT and taxpayers involves legitimacy, charisma, expertise, and giving
information. Tax collection through coercive power only will cause Millennials to behave
noncompliance. Baby Boomers have respect for authority figures (Bencsik & Machova,
2016). The word respect for authority figures can often cause fear to make mistakes or break
the law. Therefore, according to its characteristics, the Baby Boomer generation more
supportive of the implementation of the coercive power concept by the tax authorities. The
characteristic of generation X that have little tolerance for bureaucracy and rules, respect to
time and attendance, and fiercely independent (Gursoy et al., 2008), moreover, we conclude
generation X is more expecting the implementation of the coercive power concept and the
legitimate power of the tax authorities to run in a balanced and concurrent manner. For
generation X, the exercise of power will be more effective if through strict sanctions
accompanied by excellent service. Therefore relating to the above explanation, the
hypothesis are proposed H1: there are differences in perceptions between generations
regarding coercive power; and H2: there are differences in perception between generations
related to legitimate power.
The principle of tax justice can be seen from three perspectives, namely vertical
equity, horizontal equity, and exchange equity. Vertical equity refers to the perception of
taxpayers' equity regarding their tax burden with other taxpayers who have greater income
(Jurney et al., 2017). Vertical equity arises when low-income taxpayers feel that the tax
burden they pay is greater than high-income taxpayers (Efebera et al., 2015). This concept
underlies progressive income tax implementation. Concerning the influence of different
generations on vertical equity, previous research found that Millenials have a low preference
on vertical equity than the other generations (Jurney et al., 2017). The reason is that
Millennials have characteristics in which they are more focused on self-interest (Bencsik &
Machova, 2016). Moreover, this generation considers that imposing progressive tax tariffs
will harm them. The Baby Boomers in retirement, where the income tends to fall and taxes
are paid less, tend to rely on passive income such as interest on deposits, income on land
and building rent, and land/building sales (Tjondro, Santosa, & Prayitno, 2019). This
Jurnal Economia, 15(1), April 2019, 96-113
102
makes the Baby Boomer support the imposition of a progressive tax rate, so that the higher
the taxpayer's economic capacity, the higher the tax burden paid. Generation X is in its
productive period where this generation's income is the largest compared to other
generations, so we suspect that generation X tends not to support vertical equity. Hypothesis
three of this study is H3: there are differences in perceptions between generations regarding
vertical equity in the tax system.
Horizontal equity refers to the perception of taxpayers' equity regarding their tax
burden about other taxpayers who have the same income. Horizontal inequity arises when
taxpayers perceive that they share on the tax burden disproportionately larger than other
taxpayers with relatively equal income (Efebera et al., 2015). The characteristics of
Millennials that are identical to technological advances, global interaction (Jurney et al.,
2017), oriented to success and creativity (Bencsik & Machova, 2016) make Millennials tend
to enjoy several types of business or profession. Therefore, we argue that Millennials are
more supportive on horizontal equity concept than other generations. Therefore relating to
the above explanation, hypothesis four is proposed H4: there are differences in perceptions
between generations regarding horizontal equity in the tax system.
Exchange equity refers to the perceived fairness of taxpayers from the exchange
relationship between taxpayers and tax authorities, or the benefits felt by taxpayers on each
nominal tax paid (Jurney et al., 2017). Exchange equity refers to the perceived fairness of
the trade or the benefit received for nominal paid (Efebera et al., 2015). Concerning the
characteristic differences, Millennials and X tend to support the application of exchange
equity since communication and interaction are their priority (Lyons, 2003; Bencsik &
Machova, 2016). Therefore, Millennials and X need to be constantly convinced for the use
of tax they already paid. Hypothesis five is H5: there are differences in perceptions between
generations regarding exchange equity in the tax system.
Figure 1: Conceptual Framework
METHOD
The subject of research in this study is all individual taxpayers who have a business related
to retail/production or services/profession occupations, which are domiciled in the cities of
Jakarta, Bandung, Semarang, Surabaya, and Denpasar. The individual taxpayers who own
business are selected since they are responsible for their tax payment and tax reporting (self-
assessment system). We use a survey method for data collection. In August 2018, we started
Coercive Power
Legitimate Power
Vertical Equity
Generation Groups
Horizontal Equity
Exchange Equity
Control Variables
Genders
Type of Business
Income tax calculation
method
H1
H2
H3
H4
H5
Intergenerational Perceptions of Coercive and Legitimate Power (Tjondro, et.al.)
103
sending the questionnaire online to random taxpayers in communities of parents of our
students. We received total of 175 questionnaires for all groups that are responded, and only
120 meet the criteria, so we obtained observations of 40 respondents for each group.
Determination of samples using the non-probability sampling which is the quota sampling
method. We choose respondents based on the following criteria: (1) the number of
respondents between generations is equal, (2) the number of male and female respondents
is equal, (3) the number of respondents who own a business in retail/production or
services/profession occupation are equal, (4) respondents represent the cities of Jakarta,
Bandung, Semarang, Surabaya, and Denpasar, (5) respondents represent “recording”
method and “bookkeeping” method, which in Indonesia tax system determined by the gross
income of business, (6) understanding the prevailing tax system in Indonesia, which is seen
from filling in the Annual Tax Return for the last 3-5 years, (7) the number of respondents
who fill out their tax return with and without tax consultants are the same.
We measure coercive power for two indicators, tax audit and application of
sanctions, and the measurement of legitimate power of tax officers for legitimacy, charisma,
expertise, and providing information for taxpayers. We modified the questionnaire from
prior research, which is (Hartl, Hofmann, Gangl, Hartner-Tiefenthaler, & Kirchler, 2015).
The questions concerning vertical equity are modified from the research of (Efebera et al.,
2015) to measure perception about the progressive rate. The question concerning horizontal
equity and exchange equity is adapted and combined from the previous research, which is
(Jurney et al., 2017) and (Efebera et al., 2015) to measure horizontally equitable and benefits
received for the payment of tax. The questionnaire is in the appendix. The measurement
scale used for coercive power, legitimate power, vertical equity, horizontal equity, and
exchange equity is a seven-point Likert scale, from “strongly disagree” up to “strongly
agree” opinions. Besides, this study uses control variables to avoid bias on testing generation
effect to the dependent variables. This study uses three control variables: gender (male or
female), business type (retail/production or services/profession), and method of calculating
income tax (gross income < 4.8 billion or gross income ≥ 4.8 Billion) with dummy variables.
This study uses Custom Factorial ANOVA to determine differences in perceptions
between three group of generations. This study uses ANOVA because ANOVA is suitable
for testing differences between groups and the control variables in this study use dummy
variables. To test the validity of each question, we carried out a factor analysis using Pearson
Correlation. For each statement, items show Pearson correlation value ranging from 0.618
to 0.921, means that the significance value of each item ≥ 0.5, so it can be determined that
all questions are valid. The value of the Cronbach's alpha is acceptable when each value is
the same or more than 0.6 and 0.7 (Kock & Lynn, 2012). The value of each variable which
ranging from 0.627 to 0.952 has met the standard which means they are reliable.
FINDING AND DISCUSSION
This study uses a questionnaire instrument that has been distributed in 2018, with the object
of research of individual taxpayers who have businesses in the retail and production fields
as well as free work spread in the cities of Jakarta, Bandung, Semarang, Surabaya, and
Jurnal Economia, 15(1), April 2019, 96-113
104
Denpasar. The distribution of questionnaires was carried out online in the form of Google
Form. The entire questionnaire responded in this research was 175 questionnaires. Of the
total questionnaires that have been responded, only 120 questionnaires can be analyzed and
meet the criteria. Questionnaires that did not meet the criteria of the study included
respondents with business locations outside the city that those specified and respondents
did not fill out the tax return within a minimum period of 3-5 years.
Table 2. Demographic Summary of Respondents (n = 120)
Total
Sample
(n =
120)
Millennials
(n = 40)
Generation
X (n = 40)
Baby
Boomers
(n = 40)
Gender
Male
50,8%
55,0%
60,0%
37,5%
Female
49,2%
45,0%
40,0%
62,5%
Business
Type
Retails/Productions
54,2%
50,0%
52,5%
60,0%
Services/Profession
45,8%
50,0%
47,5%
40,0%
Business
Location
(City)
Jakarta
19,2%
7,5%
25,0%
25,0%
Bandung
4,2%
0,0%
10,0%
2,5%
Semarang
10,0%
2,5%
25,0%
2,5%
Surabaya
50,0%
77,5%
30,0%
42,5%
Denpasar
16,7%
12,5%
10,0%
27,5%
Gross
Income
Calculation
Method
Recording (Gross Income <
4.8 Billion Rupiah)
68,3%
62,5%
67,5%
75,0%
Bookkeeping (Gross Income
≥ 4.8 Billion Rupiah)
31,7%
37,5%
32,5%
25,0%
Tax Return
Preparation
Self-prepared
45,8%
57,5%
47,5%
32,5%
Tax Attorney
49,2%
32,5%
52,5%
62,5%
Other
5,0%
10,0%
0,0%
5,0%
Table 3 shows the mean, standard deviation, minimum value and the maximum
value of each composite variable which is seen according to each generation group. The
mean value of each variable shows the magnitude of each generation's support related to
the dependent variable. The higher the mean value, meaning that the generation
increasingly supports the dependent variable. Table 3 shows the mean coercive power -
Baby Boomer of 5.850 followed by Millennials and Generation X with mean 5.025 and
4.913. This shows that Baby Boomers support coercive power more than other generations.
Regarding the legitimate power variable, Generation X has the highest mean with 5.321
followed by Millennials who have almost the same mean of 5.221 and Baby Boomers with
the lowest mean compared to the other two generations of 3.629. This shows that
Generation X and Millennial support more legitimate power than Baby Boomers. In the
vertical equity variable, Baby Boomer has the highest mean of 5.592 which is then followed
by Millennials with a mean of 4.333 and Generation X with the lowest mean of 3.942. This
shows that Baby Boomers support more vertical equity than other generations. In the
horizontal equity and Exchange Equity variables, Millennials have the highest mean,
followed by Generation X and Baby Boomer. This shows that Millennials are more
Intergenerational Perceptions of Coercive and Legitimate Power (Tjondro, et.al.)
105
supportive of horizontal equity and exchange equity than other generations. Figure 1 also
shows that the graph of Baby Boomers has a different pattern compared to the other graphs.
Table 3. Descriptive Statistics
Independent
Variables
Total
Sample
Millennials
X
Baby
Boomers
CP – Composite
Mean
5,263
5,025
4,913
5,850
SD
1,438
1,489
1,643
1,182
Minimum
1,00
1
1
1
Maximum
7,00
7
7
7
LP – Composite
Mean
4,724
5,221
5,321
3,629
SD
1,497
1,473
1,387
1,630
Minimum
1,00
1
1
1
Maximum
7,00
7
7
7
VE – Composite
Mean
4,622
4,333
3,942
5,592
SD
1,555
1,631
1,784
1,251
Minimum
1,00
1
1
1
Maximum
7,00
7
7
7
HE – Composite
Mean
3,775
4,350
3,742
3,233
SD
1,621
1,517
1,731
1,614
Minimum
1,00
1
1
1
Maximum
7,00
7
7
7
EE – Composite
Mean
3,750
4,108
4,250
2,892
SD
1,511
1,491
1,715
1,327
Minimum
1,00
1
1
1
Maximum
7,00
7
7
7
After we tested the coercive power variable, legitimate power, vertical equity,
horizontal equity, and exchange equity respectively, according to Table 4, had significant
value 0,065; 0,200; 0,065; 0,008; and 0,200. Only the horizontal equity variable has a
significant value below 0.05. This shows that the horizontal equity variable is not normally
distributed. Therefore, we do the Bootstrap. After we tested the coercive power variable,
legitimate power, vertical equity, horizontal equity and exchange equity respectively (table
5) had a significant value > 0,05. This shows that all variables used do not occur
(homogeneous) heteroscedasticity.
Table 4. Normality Test with Kolmogorov-Smirnov Test
CP -
Composite
LP -
Composite
VE -
Composite
HE -
Composite
EE -
Composite
Sig
0,065
0,200
0,065
0,008
0,200
Jurnal Economia, 15(1), April 2019, 96-113
106
Table 5. Heteroscedasticity Test with Levene Test
CP -
Composite
LP -
Composite
VE -
Composite
HE -
Composite
EE -
Composite
F
0,986
0,986
1,589
1,448
1,383
Sig
0,487
0,487
0,068
0,115
0,146
On table 6, the significance value of generational to coercive power (CP) and
legitimate power (LP) show sig value < 0,001. The result of testing H1 indicates
generational effects preference in the application of coercive power of tax officers. A similar
result of testing H2 also indicates generational effects preference in the application of
legitimate power in tax collecting. Therefore our hypothesis for H1 and H2 are accepted.
From table 6, it can be seen that the value of Adjusted R Square for coercive and legitimate
power are 0,108 and 0,301. The results show that the independent variables which are a
generational group, gender, business type, and method of calculating income tax can
explain the value of coercive and legitimate power of 10,8% and 30,1%. We also found a
significant effect of generational on vertical equity, horizontal equity, and exchange equity.
Table 6 shows the significance value of the three variables is below 0,005. The results
confirm that generational affect vertical equity, horizontal equity, and exchange equity.
Therefore, H3, H4, and H5 are confirmed.
Table 6. Differential Test Results for ANOVA
Independent Variables
CP -
Composite
LP -
Composite
VE -
Composite
HE -
Composite
EE -
Composite
Intercept
Mean Square
2816,643
2338,471
2200,077
1494,470
1445,564
F
2290,993
1503,238
1720,540
896,822
1177,909
Significance
0,000
0,000
0,000
0,000
0,000
Generational
Mean Square
10,236
26,680
29,733
10,930
14,663
F
8,326
17,151
23,252
6,559
11,948
Significance
0,000
0,000
0,000
0,002
0,000
Gender
Mean Square
0,608
11,528
0,654
0,011
19,025
F
0,495
7,411
0,511
0,007
15,502
Significance
0,483
0,008
0,476
0,934
0,000
Business Type
Mean Square
1,634
1,931
0,032
0,232
7,082
F
1,329
1,241
0,025
0,139
5,771
Significance
0,251
0,268
0,874
0,710
0,018
Income Tax Calculation Method
Mean Square
0,131
3,381
0,820
2,339
0,042
F
0,107
2,173
0,641
1,404
0,034
Significance
0,745
0,143
0,425
0,239
0,854
Adjusted R Squared
0,108
0,301
0,264
0,088
0,299
Intergenerational Perceptions of Coercive and Legitimate Power (Tjondro, et.al.)
107
The test results of differences perception between generations can be seen in table 7.
Related to coercive power, table 7 shows there are significant differences between Baby
Boomers and Millennials (p = 0,001) and between Baby Boomers and X (p = 0,000),
whereas, between Millennial and X, there is no significant difference. The similar result also
found concerning legitimate power, shows that there is a significant difference between
Baby Boomer and Millennial (p = 0,000) and between Baby Boomer and X (p = 0,000),
whereas, between Millennial and X, there is no significant difference. Regarding vertical
equity, shows there is a significant difference between Baby Boomer and Millennial (p =
0,000) and between Baby Boomer and X (p = 0,000), whereas, between Millennial
Generation and Generation X, there is no significant difference. Regarding the exchange
equity, shows there is a significant difference between Baby Boomer and Millennial (p =
0,000) and between Baby Boomers and X (p = 0,000), whereas, between Millennial and X,
there is no significant difference (p = 0,643). The different result found regarding horizontal
equity shows that there are significant differences between Millennial and X (p = 0,024) and
between Baby Boomer and Millennial (p = 0,002), whereas, between Baby Boomer and
Generation X, there is no significant difference (p = 0,132).
Table 7. Differential Test Results for One Generational Group Towards the Other Group
(I) Gen
(J) Gen
CP - Composite
LP - Composite
VE – Composite
HE – Composite
EE -
Composite
Mean
Diff (I-J)
Sig.
Mean
Diff
(I-J)
Sig.
Mean
Diff
(I-J)
Sig.
Mean
Diff
(I-J)
Sig.
Mean
Diff
(I-J)
Sig.
BB
Millenn
0,836
0,001
-1,409
0,000
1,304
0,000
-1,066
0,002
-1,019
0,000
BB
Gen X
0,958
0,000
-1,502
0,000
1,695
0,000
-0,474
0,132
-1,134
0,000
Millenn
Gen X
0,122
0,624
-0,093
0,740
0,391
0,126
0,592
0,024
-0,115
0,643
We found two groups with different perception regarding the coercive and legitimate
power of the DGT. Millennials and X perceive that the application of coercive and
legitimate power by the DGT has been implemented in a balanced way. This result can be
seen in the average score in Table 8. Millennials give the score of 5,025 and 5,221 for the
implementation of coercive and legitimate power. Similarly, with the response of
Millennials, generation X give a score of 4,913 and 5,321 for the coercive and legitimate
power of tax officers. Different from the Baby Boomers group who perceive that the
application of coercive power by the DGT is greater than legitimate power.
Table 8. Mean Score of Coercive and Legitimate Power
Variables
Mean Score
Millennials
Gen X
Baby Boomers
Coercive Power
5,025
4,913
5,850
Legitimate Power
5,221
5,321
3,629
From the results of the Millennials and X groups, it can be concluded that they want
the application of balanced coercive power and legitimate power because the combination
Jurnal Economia, 15(1), April 2019, 96-113
108
of the two produces trust to the DGT as legitimate government institutions to collect taxes
(Hofmann et al., 2017). Legitimate power and coercive power in combination might be
perceived as legitimate expert power, increase trust by creating the impression that free
riders will be penalized while supporting honest taxpayers in order to achieve high-level tax
compliance (Hofmann, Gangl, Kirchler, & Stark, 2014). When looking at Millennials and
X characteristics that are more open, respectful of differences, creative, dislike hierarchy
and tradition, exclusive application of coercive power is contrary to the values that they
believe in, resulting in a decrease in trust in DGT (Hofmann et al., 2017) and weaken
effective social relations and trust each other (Kramer, 1999; Das & Teng, 2001). Exclusive
application of coercive power will also reduce implicit trust, improve antagonistic climate
perception, and enforced compliance (Hofmann et al., 2017). Molenmaker, de
Kwaadsteniet, & van Dijk (2014) found that people’s willingness to costly reward and
punish is not only determined by the type of sanction (reward versus punishment) but is also
moderated by the type of social dilemma people face. Taxpayers do not have the option to
turn to another tax authority if they are not satisfied with the tax authorities in their country
(Hofmann et al., 2017). Therefore in the case of taxpayers and tax authority combination
of coercive and legitimate power is essential to build a service climate in order to improve
voluntary compliance. Hartl et al. (2015) also found that the combination of applying
coercive and legitimate power affected the taxpayer's belief in the power of DGT and
increased tax payments. The impact of legitimate power on tax compliance supports the
assumption that perceptions of service orientation lead to reciprocal behavior, where
taxpayers tend to report their earnings honestly when they believe that the tax authority
works for the good of taxpayers (Hartl et al., 2015). With Millennials and X being the most
significant tax contributor to the country today, the government should begin to make any
adjustments to the services of tax officers and DGT to increase voluntary tax compliance.
Baby Boomers tend to support the implementation of the coercive power concept by
the tax authorities. This is also related to the characteristics of the Baby Boomers generation
formed by living in wartime. This result supports the previous research of Bencsik and
Manova. Baby Boomers are hard workers, profoundly respect tradition and hierarchy,
respect for authority figures (Bencsik & Machova, 2016). The word "respect" for authority
figures can often cause fear to make mistakes or break the law.
Regarding tax fairness, we also found that Millennials and X have a different
perception of vertical equity than Baby Boomers. Millennials and X do not support vertical
equity. Our result was consistent with one of Jurney et al. (2017). Millennials strongly
support the concept of horizontal equity where for the same income will be subject to the
same tax burden, regardless of the type of work or business. This has implications for tax
regulations that still apply different tax burdens for different business type, including
Indonesia. For example tax rules in Indonesia for entrepreneurs with gross income below
4.8 billion, services business or profession are subject to higher tax rates than
retail/production businesses. Characteristics of Millennials are having several types of
business and not only bound to one job. Millennials desire greater flexibility in working
hours (PwC, 2013) and choose freelance or part-time work rather than a typical nine-to-five
Intergenerational Perceptions of Coercive and Legitimate Power (Tjondro, et.al.)
109
schedule (Taylor, 2017). Simplified calculation and tax rates become important things that
need to be considered by the government. In terms of perceptions of exchange equity,
Millennials and X have different perceptions than Baby Boomers. Our result confirmed that
Millennials and X felt greater exchange equity than Baby Boomers and had a different result
with Jurney et al. (2017).
CONCLUSION
Our result found that Millennials and X have the perception that tax officers have
implemented coercive and legitimate power in a balanced. Different result found in the
group of Baby Boomers who assess that tax officers tend to focus on coercive power than
legitimate power because Baby Boomers see the application of legitimate power as the
application of weak power and are considered less assertive. Differences in the perception
indicate that Millennials and X prefer the implication of both powers in continuously and
sustainability. With Millennials and X are the most contributors of tax income in Indonesia,
we believe that coercive and legitimate power is essential to build a service climate in order
to improve voluntary compliance.
Different test results indicate a significant difference in the perception of each
generation regarding vertical equity. Baby Boomer supports the implementation of vertical
equity where taxation is imposed progressively, while Millennials and Generation X tend
to be less supportive of implementing power with the concept of vertical equity. Regarding
horizontal equity, the results of different tests also show significant differences regarding the
perception of each generation. Millennials support the application of the concept of
horizontal equity. On the other hand, Baby Boomer and Generation X do not support the
application of horizontal equity. Regarding the exchange equity, the results of different tests
indicate a significant difference in the perception of each generation. Millennials and X felt
greater exchange equity than Baby Boomers.
Considering the purpose of this study is to see the differences in intergenerational
perceptions related to the authority of tax authorities and tax justice, it can provide an opportunity
for subsequent researchers to examine the effect of the application of power by the tax authorities
on service-orientation and trust. This research is limited to non-probability sampling. This technique
results in non-representative results that cannot be generalized to the population.
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Appendix
Survey Questions
CP1
I believe the Director General of Taxes gives strict sanctions for tax evaders.
CP2
I believe the Director General of Taxes enforce their goals through audits and sanctions.
CP3
I believe the Director General of Taxes give strict sanctions when taxpayers make mistakes.
CP4
I believe the Director General of Taxes conducts audits and provides penalties to taxpayers
forcibly.
LP1
I believe the Director General of Taxes understands how to provide useful advice to taxpayers.
LP2
I believe the Director General of Taxes provides professional advice to taxpayers.
LP3
I believe the Director General of Taxation is a partner to settle tax obligations of taxpayers.
LP4
I appreciate the Director General of Taxes for providing useful information and advice.
LP5
I believe the Director General of Taxes is obliged to collect taxes legitimately.
LP6
I respect the Director General of Taxes for the high standards of work and services they applied.
LP7
I respect the Director General of Taxes because they provide useful information for taxpayers
in carrying out obligations appropriately.
VE1
The income tax that I paid was fair compared to other income tax that had a higher income
than me.
VE2
I pay a higher income tax than taxpayers who have higher economic capabilities.
VE3
Taxpayers who have higher economic capacity pay greater income tax than me.
HE1
I pay income tax almost as much as other people who earned the same income.
HE2
Most people who earn the same income pay higher income tax than me.
HE3
I pay a higher income tax compared to most people who earn the same income.
EE1
The income tax I paid was equal to the benefits that I received in the form of government
facilities and services.
EE2
The income tax that I paid was greater than the services that I received from the government.
EE3
I am satisfied with the benefits I receive from the government compared to the amount of
income tax that I pay.
