Vol. 5 No. 1 (2023): October: Navigating Changes, Embracing the Tax Reform

Greetings to all the avid readers of Scientax: Jurnal Kajian Ilmiah Perpajakan Indonesia

Start from a question, Does Government Effectiveness Moderate the Relationship Between Regulatory Quality and Tax Complexity?: A Tale of a Hundred Nations, the relationship among government effectiveness, regulatory quality, and tax complexity has been a topic of considerable interest, as evidenced by this study. Understanding on how regulatory quality impacts tax complexity across nations and how government effectiveness moderates this relationship underscores the significance of robust regulations in establishing an efficient tax system.

In the context of Indonesia's economic recovery during the COVID-19 pandemic, one of the government's decision to reduce the corporate income tax rate from 25% to 22% in 2020 was a pivotal move. A comprehensive evaluation of this policy revealed that while about a quarter of the 93.8% lost tax revenue occuring from the tax rate reduction was expected to be recovered through increasing other tax revenues, the decision to maintain the corporate income tax rate at 22% beyond 2022 remains justifiable based on the Evaluation of Corporate Income Tax Rates Reduction Policy: Case Study in Indonesia.

Moreover, one of the reasons Indonesia's tax ratio has yet to reach its target is the informal sector and tax avoidance. The individual's desire to pay or avoid taxes is related to the tax morals. The study of Determinants of Tax Morale: Empirical Study on Micro, Small, and Medium Enterprises in Java delved into the impact of various factors, such as trust in the government and tax administration, national pride, the likelihood of detection in tax evasion efforts, and the severity of punishment on the tax morale of micro, small, and medium enterprises (MSMEs) owners.

The challenges emerging from tax reform have brought attention to the issue of tax aggressiveness, particularly within the banking sector. A study that asks Do Operational Risks and Credit Risks Make Banks More Aggressive to Avoid Taxes? Empirical Study of Banking Companies on the Indonesia Stock Exchange explored whether operational and credit risks incentivize banks to adopt aggressive tax avoidance strategies. Additionally, a sustainable approach to tax audit inspection has been proposed, emphasizing the detection of tax aggressive strategies through an analysis of the fees charged by independent auditors. The study A Sustainable Approach on Tax Audit Inspection: How Tax Aggressive Strategies Can be Detected from Fee of Independent Auditor, which indicates that paying for audit services deters the use of tax-evasive strategies. Consequently, details regarding audit fees can predict the behavior of businesses under scrutiny. These findings offer valuable insights for the Directorate General of Taxes (DGT) in refining its tax audit methods. Supporting these ideas, innovative measures have been introduced, such as data analytics for identifying fraudulent tax invoice issuers in the Value-Added Tax System. Data Analytics for Identifying Fraudulent Tax Invoice Issuer in Value Added Tax System Fraudulent aims to build a model to detect issuer of tax invoices  based on non-actual transactions. 

Indonesia's rapidly growing digital economy presents challenges and opportunities for the DGT in revenue collection. Despite the complexities of overseeing digital transactions, gathering their electronic data effectively is feasible. The approach Toward Seamless Taxation Through a Split Payment Mechanism on the Marketplace and Quick Response (QR) Payment System offers advantages to both taxpayers and the DGT by simplifying tax responsibilities, augmenting revenue, and optimizing cash flow for the DGT, all while minimizing supervision expenses.

Furthermore, in the pursuit of effective tax reform, a review of DGT’s employee performance evaluation system is an important aspect as mentioned in Review of the Employee Performance Evaluation System at the Directorate General of Taxes: Its Effectiveness and Employee Satisfaction Level article, while the majority of respondents expressed satisfaction with the system's effectiveness, certain areas related to the performance status of SABCD and the level 1 and level 2 ranking sessions, garnered strong disagreement among respondents.

This diverse range of studies and initiatives highlights the multifaceted nature of taxation in Indonesia and the continual efforts were undertaken in Navigating Changes, Embracing the Tax Reform.