The urgency of reforming Indonesia’s tax Law in the face of economic digitalization

Abstract

Tax reform in Indonesia occurred from 1983 to 2009. In the last few years, several changes have been made to the same tax law in a short period. This indicates the Indonesian government’s intention to reform the tax system fundamentally, but inconsistencies in determining the direction of long-term tax policy. It is necessary to research the concept of tax legislation in Indonesia to provide legal certainty in the context of tax reform in the era of digitalization. The research method used is normative juridical, with a qualitative research approach, and the research specifications used are descriptive-analytical. The results indicate that the Indonesian government is not optimal and inconsistent in formulating firm policies regulating taxes on digital activities. Second, the concept of permanent establishment formulated in a series of national regulations needs to include significant economic presence criteria to be able to reach digital platform companies. Third, the significant development of information technology needs to be accompanied by developments in the legal field that aim to become a legal framework for digital tax collection to minimize the loss of potential state revenue from the digital tax sector. Fourth, national tax reform is needed to adjust the international tax reform that is still being drafted through the Organization for Economic Cooperation and Development Consensus. Therefore, the Government of Indonesia needs to develop a comprehensive tax regulation concept that can ensure certainty, and provide justice, economic efficiency, robustness to avoidance, ease of administration, and incentive compatibility.