Tax Ratios and the Need for Collaborative Research
Author: Christine Tjen, SE., Ak., M.Int.Tax, CA, CACP, Coordinator of Tax Education and Research Center (TERC) FEB UI and Lecturer of Taxation FEB UI
Collaborative research is needed for the issuance of the appropriate tax policy.
Tax Magazine (Majalah Pajak) – (15/9/2021) Recently, the government submitted the 2022 State Budget Draft (RAPBN) with a composition of Rp 2,708.7 trillion in state expenditures and Rp 1,840.7 trillion in state revenues. Specifically for tax revenues, the government targets to reach Rp 1,262.92 trillion or a growth of 10.5 percent from the outlook in 2021.
On the other hand, Indonesia’s tax ratio is still low. As of 2020, Indonesia’s tax-to-GDP ratio is around 8.1 percent and state revenue to GDP is 10.4 percent. This ratio is relatively low compared to the average for African countries (17.2 percent), Latin American and Caribbean countries (23.1 percent), OECD countries (34.3 percent). Thus, the government, especially in this case the Directorate General of Taxes, Ministry of Finance, has a tough job in increasing the tax ratio in the medium term.
The tax ratio can be increased by increasing taxpayers’ tax compliance and improving the tax awareness of prospective taxpayers. Meanwhile, to increase compliance, the government must explore and establish appropriate policies. For this reason, it is necessary to implement appropriate policies, one of which is evidence-based policy (EBP). This is a concept in public policy in which the policies taken must be based on objective and scientifically proven evidence through research results. So, research plays a vital role in the field of taxation.
Furthermore, taxation is a multidisciplinary science, covering aspects of law, accounting, economics, administration and even psychology. These aspects make taxation an important and interesting issue to explore and research from various scopes and points of views.
Important factors
There are several things to consider in tax research. The first is the clarity of the theme or topic and the formulation of the problem. Based on Shevlin (1999), research topics in tax research can be grouped into three categories, namely related to tax policy, tax planning, and tax compliance. Furthermore, according to Hanlon and Heitzman (2010), there are several tax research topics that can be grouped into corporate tax avoidance, taxes and asset pricing, corporate decision making, and informational role of income tax expense reported for financial accounting.
Apart from that, there are several topics relevant to DGT’s research needs, including tax compliance, tax regulations, tax information technology, human resources and organizations, tax education, tax services, tax law enforcement, and tax business processes.
The second factor is the research method. There are several research methods that can be carried out, namely quantitative, qualitative, and mixed methods that combine the two. One of these quantitative methods is done through surveys/questionnaires. In its development, surveys can currently also be conducted online, using both paid and free platforms. Comparatively, qualitative methods are carried out by conducting in-depth interviews and/or Focus Group Discussions (FGD).
One example of a research that uses both methods is that which has been conducted by Abbas, Tjen and Wicaksono (2021) in a study related to Talking About Tax (Pajak Bertutur), the researcher uses a questionnaire to elementary and junior high school students who take part in the Speech Tax program to determine their level of awareness of taxation and followed by in-depth interviews and FGD methods with teachers from schools participating in the Talking About Tax Program to explore their perceptions and inputs about the program.
The third factor is data availability. The availability of publicly accessible taxation data is often a limiting factor. Especially if it is related to certain Individual Taxpayer (WP) data. In fact, these data are important if we want to conduct research related to taxpayer’s behavior. Therefore, in conducting tax research, researchers must first be able to determine whether the required data, both secondary data and primary data, can be obtained.
Data support
Based on the results of Research from Herawati and Bandi (2017) in their article entitled “Twenty Years of Tax Research in Accounting: A Bibliographic Study”, area mapping shows that the market share of tax research is only 16.8 percent of accounting research. Tax research topics revolve around financial accounting, behavior, and policy evaluation. Quantitative research methods are dominant in tax research.
With reference to the above discussion, the role of research in the tax ecosystem in Indonesia has a very important position. Why? Because the results of the research can be used as input for regulators, in this case the DGT and also the Fiscal Policy Agency (BKF) of the Ministry of Finance, as well as input needed by standard setters such as the Indonesian Institute of Accountants (IAI) or for tax practitioners in Indonesia as well as for tax practitioners outside Indonesia. This is also to support the evidence-based policy implemented by regulators in the field of taxation in Indonesia.
In this regard, government support, especially the DGT, is important, especially regarding the availability of tax data for researchers.
In addition, research collaboration between academics/researchers and the government must also be increased to support increased tax research both in quantity and quality. If this is the case, we can hope that the research results will contribute to assisting the process of determining targeted tax policies, which will be followed by increased tax compliance, and which will ultimately help increase Indonesia’s tax ratio in the future.
Source: Tax Magazine. Issue: Wednesday, September 15, 2021. XC-Tax Research volume. page 49.
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