Compliant Discomfort: An Autoethnography Of Vat Friction In A Labour-Intensive Small Service Firm

Abstract

This study examines how value-added tax (VAT) formalization is experienced by a small labour-intensive sanitation and wastewater service firm in Indonesia. The firm became a taxable entrepreneur as part of a conscious strategy to enter corporate markets, where quotations, purchase orders, invoices, VAT invoices, and tax-compliant documentation are required. Using analytic autoethnography, the study draws on the author's insider-adjacent tax-support role, practitioner reflection, anonymized administrative episodes, and recurring tax-support interactions. The findings show that VAT friction did not arise from refusal to comply. The firm paid and reported on time, yet experienced discomfort because its output was highly visible through corporate invoices while much of its economic input remained weakly visible as creditable input VAT. Labour, vehicle maintenance, fuel, tolls, disposal-related payments, field operations, and delayed corporate payments were central to the business model, but generated limited input VAT credits. The study introduces the concept of the input visibility gap and links it to compliant discomfort. It also shows that VAT compliance is mediated by corporate customers through payment timing, withholding-tax treatment, invoice-period expectations, and bargaining power. The study contributes to SME taxation literature by shifting attention from compliance versus non-compliance toward the lived experience of formally compliant small service firms under ordinary VAT.