A note to transfer pricing audit performance by Indonesia’s tax administration based on tax court decision 2015-2019 on manufacturing industry

Abstract

This research discusses the transfer pricing audit performance of Directorate General of Taxes (DGT) based on the tax court stipulation during fiscal year 2015-2019. This research employed qualitative research method. The data were collected through literature review and interview. The findings showed that the cases brought to the tax court solely due to administrative and technical matters had been quite significant in number, which were more than 40% of the cases settled. Unfortunately, inappropriate assessment process took the larger proportion in the failure in complying with the technical and administrative rules while conducting the audits. On the other hand, in regards with non-technical and administrative issues, DGT mostly won the cases. It means that DGT were more reliable in auditing once it complied with the technical and administrative matters. The research also showed that DGT fully realized that the infrastructure of transfer pricing handling needed supports from various aspects.

Evaluation of Capacity Adjustments for Transfer Pricing Disputes: A Case Study of Tax Court Decisions

“…Research specifically on capacity adjustment using the TNMM has never been carried out in Indonesia. In fact, companies in Indonesia, especially manufactures that have affiliated transactions, have certainly experienced non-optimal capacity conditions [3].…”

Tax Audit Signals Contribute to the Diminishing of Tax Haven Beneficiary Firm Value

“…The tax audit dispute brought to the tax court has a high tendency around technical and administrative issues compared to nontechnical issues. Tambunan (2020) explained that most tax audit cases in Indonesia revolve around technical and administrative matters. Tax audits that deal with technical and administrative issues cause tax audit disclosures to negatively signal investors and creditors since the potential of making administrative errors by business activities is large.…”

“…These studies show varying results, so our study further examines the association of tax haven utilization to firm value in Indonesia. Several studies on tax audits are Chan et al (2015) and (Tambunan, 2020). Chan et al, (2015) explained how the tax authorities select firms to be audited based on certain characteristics.…”

“…The disclosure causes investors to have a negative view of management performance since it can reduce future returns for investors. Indeed, tax audits, which often emerge from technical and administrative problems (Tambunan, 2020), also signal high tax compliance costs in Indonesia.…”

The role of economic justice in realizing the principle of utmost good faith fairness in default insurance

“…Therefore, one of the basis or principle in a law rule should reflect «justice» and against «i njustice or discriminative» (Sethi, 2021). The law for Tambunan (2020) created by society as the expression of the concept of fairness and justice which united, therefore a law rule created by authority or the institution of constitution maker are not allowed to give protection only on one group society or particular community or in a contractual relationship, or only stand for one of the side (Anifalaje, 2019;Tambunan, 2020).…”