as both merely ‘latched’ ointo restaurants’ incumbent existing system and automatically relayed taxable sales records to local tax authorities. With such minimum required adjustment, deviances were less likely to occur, therefore manifested in better compliance in general in the form of boosted tax receipts upon TMD and WS installation.

Third, we may need to highlight the centrality of business size in influencing our results. Generally, less noncompliance observed in larger businesses (Slemrod, 2007). Likewise, we found that bigger hotels and restaurants tend to be more tax compliant. That is particularly visible among West Manggarai’s restaurant observation, where TMD and WS recipients were mostly larger businesses (Figure A.1). Consistent with the AllinghamSandmo (1972) and Naritomi (2019) tax evasion framework, this compliance is because they—particularly those that are part of a restaurant/hotel chain—have higher perceived probability of detection stakes to underreport due to their visibility and number of thirdparty stakeholders able to attest to their report credibility. This high probability of being caught evading partly contributes to the upward impact of TMD and WS observed in our baseline estimation.

On the other hand, smaller restaurants receiving RPOS normally have more leeway to underreport as they are generally part of the informal sector. Their scales of business enables them to lay low and alter their transaction reports with minimum risks. Due to the cash-based nature of the informal sector, it is simpler for these businesses to avoid having any third-party data associated with them, making it difficult for the tax authority to confirm their transactions.

In Gorontalo, TMD’s muted effect on both restaurant and hotel tax compliance could be explained by the businesses’ relatively high compliance—as measured in their tax payment—prior to receiving TMD units. As the provincial capital, the city of Gorontalo is bigger and more densely populated compared to West Manggarai, and with such different characteristics we may expect better technology sophistication among bigger businesses. With more avid use of electronic payment technology even before the acquisition of TMD devices, there could be two possible outcomes: the businesses were just equally compliant following the use of TMD or they found a way around installed TMD to hold back their increased taxable transactions. Either way, the final tax payment did not change substantially. It is important to note, however, that our estimates might stem from the lack of statistical power given the small-sized treatment group.

It is important to also note that the absence of significant effect of POS among hotel observations in both West Manggarai and Gorontalo might signal the industry-specific characteristic which shapes the way it responds to compliance-monitoring tools like POS. Hotel industries in both districts are generally made up of larger businesses with relatively high nominal average tax payments (see Table 2), which made up a large bulk of our hotel observations. Large hotels are usually part of international franchise or the local sizable management—both tend to be very visible and are subject to public audits. This made them were just as compliant even before the arrival of the POS distribution program. In addition to that, opening hotel businesses alike requires licenses and involves more officiation even for small to medium-sized ones. This is very contrast to F&B industry, which usually are quite loose in terms of license if the business size is small.

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