Tax Reforms and Financial Performance of the Indonesian Directorate General of Taxes between 2017 and 2021: Literature Review
DOI:
https://doi.org/10.53819/81018102t4105Abstract
Governments settle their financial obligations and pay for the public expenditures largely through finances generated from taxes and so the issue of taxation is as old as taxes itself. Formulating of new laws that govern taxation, changes in tax administration as well as minimizing loop holes of tax evasion are some of the factors that lead to improvements in tax revenue collections in Indonesia. In developing countries especially in Asia, tax reforms revolves around matters to do with economic policies while focusing particularly on the design of taxation structure and the tax management. Despite the tax reforms and increasing need to increase revenue collection and enforcement so as to provide public services, Indonesia still faces the challenges of low tax collection and tax administration. The purpose of this study was thus to assess the impact of tax reforms on the financial performance of Indonesian Directorate General of Taxes between 2017 and 2021. This study was informed by two theories; Optimal Tax Reform Theory and Open Systems Theory. The study was a literature based and the findings indicated that the implementation of the new tax systems to replace older tax systems leads to increased revenue collection compared to the past years before the implementation process. It has also been shown that the introduction of administrative tax reforms increased corporate tax compliance in several ways that included the self-assessment system and voluntary compliance which consequently reduced the number of queues at the Indonesia Directorate General of Taxes and huge savings on human resource who used to collect tax prior to the tax reforms. The study thus concluded that, electronic tax registration, and electronic tax identification number, electronic filing of tax return and electronic tax payment and administrative reforms have statistical positive significant relationship with revenue performance, implying that digitalization has a positive and a statistically significant influence on revenue performance. The study thus suggested that policy makers in Indonesia should ensure that there is stable equilibrium for the exchange rates as they adversely affect the tax collection process. Moreover, the laws governing tax collection in Indonesia should be reviewed and criminal liability for those delinquent tax payers, the government also need to offer some support with regards to tax offenders.
Keywords: Tax reforms, Directorate General of Taxes, financial performance, revenue collection, Indonesia
References
Abdolrahimi, F., & Ahmadi Mousavi, S. M. (2022). Study the penological analysis of taxation crimes. Journal of Legal Research.
Abdul, F., & McFie, J. B. (2020). Tax complexity and compliance behaviour of large and medium sized business tax payers in Indonesia. Review of Integrative Business and Economics Research, 9(2), 90-106.
Abdul, F., & Wangâ, D. (2018). Tax costs and tax compliance behaviour in Indonesia. Journal of accounting and taxation, 10(1), 1-18.
Abshari, Z., Jenkins, G. P., Kuo, C. Y., & Shahee, M. (2021). Progressive Taxation versus Progressive Targeted Transfers in the Design of a Sustainable Value Added Tax System. Sustainability, 13(20), 11165.
Abu Bakar, M. A. A., Palil, M. R., & Maelah, R. (2021). Governance Quality and Tax Compliance Behaviour in East Malaysia. Asian Journal of Accounting & Governance, 15.
Abuamria, F. (2019). The effect of deterrence factors on discourage shadow economy level and tax evasion. International Journal of Academic Research in Accounting, Finance and Management Sciences, 9(1), 62-67.
Ariani, S., Aliya Rahmawati Wahab, R. A., Maulana, Y. D. F., Wijayanti, F., Mahardika, M. S., & Shihab, M. R. (2022). Impact of IT Leadership on Transformation of the Role of IT in Improving Individual Tax Return Reporting Compliance at the Directorate General of Taxes. In Intelligent Sustainable Systems (pp. 633-647). Springer, Singapore.
Auerbach, A. J. (1985). The theory of excess burden and optimal taxation. In Handbook of public economics (Vol. 1, pp. 61-127). Elsevier.
Basri, M. C., Felix, M., Hanna, R., & Olken, B. A. (2021). Tax administration versus tax rates: evidence from corporate taxation in Indonesia. American Economic Review, 111(12), 3827-71.
Bayar, A., & Frank, M. (1987). The erosion of the different tax bases. Public Finance= Finances publiques, 42(3), 341-356.
Borshchevskiy, G. A., & Mossaki, N. Z. (2021). Development of the tax administration in Russia: Results and prospects. Journal of Tax Reform, 7(2), 114-133.
Brown, C. A. (2017). The Potential for Discriminatory Tax Treatment Based on Structural Elements in OECD and UN Based Tax Treaties. In Non-discrimination and Trade in Services (pp. 163-187). Springer, Singapore.
Chen, Y. (2021, February). Analysis of the effect of computer technology on the path of tax accounting teaching reform in accounting major under the background of China’s tax reform. In Journal of Physics: Conference Series (Vol. 1744, No. 4, p. 042069). IOP Publishing.
Chongvilaivan, A., & Chooi, A. (2021). A Comprehensive Assessment of Tax Capacity in Southeast Asia. Asian Development Bank.
Cooper, D. R., Schindler, P. S., & Sun, J. (2006). Business research methods (Vol. 9, pp. 1-744). New York: Mcgraw-hill.
Creswell, J. W. (2003). A framework for design. Research design: Qualitative, quantitative, and mixed methods approaches, 9-11.
Dash, S. K., & Kakarlapudi, K. K.(2020). Kerala's GST revenue performance in a comparative perspective.
Gujarati, D. N., & Porter, D. C. (2003). Basic econometrics (Ed.). Singapore: McGrew Hill Book Co.
Hadi, A. S., & Chatterjee, S. (2015). Regression analysis by example. John Wiley & Sons.
Harelimana, J. B. (2020). Effect of Value Added Tax Reforms on Revenue Performance in Rwanda Tax authority. Op Acc J Bio Sci & Res, 1(3).
Hassan, Ibn, Ahmed Naeem, and Sidra Gulzar. (2021). "Voluntary tax compliance behavior of individual taxpayers in Pakistan." Financial Innovation 7, no. 1 (2021): 1-23.
Ihnatišinová, D. (2021). Digitalization of tax administration communication under the effect of global megatrends of the digital age. In SHS Web of Conferences (Vol. 92, p. 02022). EDP Sciences.
Juraev, E. S., & Xolmirzayev, U. A. (2020). Supporting small business subjects by tax reforms. Экономика и социум, (1), 48-52.
Labeaga, J. M., LabandeITA, X., & López-Otero, X. (2021). Energy taxation, subsidy removal and poverty in Mexico. Environment and Development Economics, 26(3), 239-260.
Mansor, M., & Tayib, M. (2013). Integrated and open systems model: An innovative approach to tax administration performance management. The Innovation Journal, 18(3), 2.
Melo-Becerra, L. A., Mahecha, J. Á., & Ramos-Forero, J. E. (2021). Corporate taxation and investment: Evidence from a context of frequent tax reforms. Hacienda Publica Espanola, (237), 3-31.
Moore, M., & Prichard, W. (2020). How can governments of low-income countries collect more tax revenue?. In The Politics of Domestic Resource Mobilization for Social Development (pp. 109-138). Palgrave Macmillan, Cham.
Newing, H., Eagle, C., Puri, R. K., & Watson, C. W. (2011). Conducting research in conservation (Vol. 775). Oxfordshire: Routledge.
Samantara, D. R. (2021). Tax reforms in India: A critical analysis. Journal Homepage: http://ijmr. net. in, 9(1).
Teece, D. J., Pisano, G., & Shuen, A. (1997). Dynamic capabilities and strategic management. Strategic management journal, 18(7), 509-533.
Von Bertalanffy, L. (1950). The theory of open systems in physics and biology. Science, 111(2872), 23-29.
Wang, J., & Lu, J. (2021). Religion and corporate tax compliance: evidence from Chinese Taoism and Buddhism. Eurasian Business Review, 11(2), 327-347.
Weber, K., & Waeger, D. (2017). Organizations as polities: An open systems perspective. Academy of Management Annals, 11(2), 886-918.
Williams, C. C., & Round, J. (2009). Evaluating informal entrepreneurs' motives: evidence from Moscow. International Journal of Entrepreneurial Behavior & Research.
Willis, B. (2021). Embracing the Certainty of Change: In Challenging Times, Accept Change and Leverage Opportunity. Tax Executive, 73, 38.
Woodside, A. G. (2010). Case study research: Theory, methods and practice. Emerald Group Publishing.
World Bank. (2018). World development report 2019: The changing nature of work. The World Bank.
World Bank. (2019). Global financial development report 2019/2020: Bank regulation and supervision a decade after the global financial crisis. The World Bank.
World Bank. (2020). Global economic prospects, June 2020. The World Bank.
Yamen, A., Allam, A., Bani-Mustafa, A., & Uyar, A. (2018). Impact of institutional environment quality on tax evasion: A comparative investigation of old versus new EU members. Journal of International Accounting, Auditing and Taxation, 32, 17-29.