Developing Coretax, DGT Is to Map Administrative Digitalisation Risks

JAKARTA, DDTCNews - The Directorate General of Taxes (DGT) should anticipate potential risks arising due to the implementation of the reform of the coretax administration system (Pembaruan Sistem Inti Administrasi Perpajakan/PSIAP in Indonesian).

According to DDTC Director of Fiscal Research & Advisory B. Bawono Kristiaji, a minimum of five risks of the digitisation of tax administration need to be identified. First, risks in the case of failure of direct and comprehensive digitisation of tax administration.

“The digitisation of tax administration 3.0 should be done in a ‘big bang’ approach. Host-to-host, interconnectedness and data integration, if done piecemeal, will not be complete and the benefits will not be optimal,” remarked Bawono in a Regular Tax Discussion held by the Indonesian Institute of Accountants (IAI) on Wednesday (15/5/2024).

Second, there are also risks related to the readiness of human resources (HR). Bawono highlighted that all human resources, both internal and external of the tax authority must adapt to the newly developed tax system.

Third, the tax authority is also required to anticipate the risks in the event of low adoption of e-filing by taxpayers. If the taxpayers are slow to transition to electronic tax return (Surat Pemberitahuan/SPT in Indonesian) despite the developed system, this can hinder the digital transformation scheduled by the authority.

“ADB has conveyed, for example, that in some countries e-filing and manual tax returns are still split 50/50. Should the gap widen, those who prefer manual filing may be reluctant to adopt the system,” said Bawono.

Fourth, the authority needs to anticipate data exchange-related risks. Personal data protection and efforts to improve data quality are indispensable to the data exchange between the tax authority and third parties.

“This is crucial on the account of automated data processing that further requires the regulation of the data formats. Otherwise, this may pose risks in the future,” warned Bawono.

Fifth, the tax authority needs to prepare change management to ensure internal support for the digitisation of tax administration.

According to Bawono, changes in business processes due to the coretax must be accompanied by changes in culture and key performance indicators (KPIs). “There must be synergy between culture and performance index. A robust digital system is not effective if it turns out that the behaviour of the authority remains unchanged, following outdated work patterns,” continued Bawono.

Impact Measurement

Once the digitisation of tax administration is officially implemented, the tax authority needs to assess the impact of digitalisation on the achievement of broader objectives.

According to Bawono, the digitisation of tax administration itself is not the ultimate goal. The key targets of the digitalisation of tax administration, instead, include increasing the tax ratio, improving compliance, reducing taxpayer compliance costs, reducing administration costs for the tax authority and enhancing taxpayer satisfaction.

“For example, the IMF estimates that the tax administration reform agenda could raise the tax ratio by 1.5%. The extent of the outcome will be evident in the future,” claimed Bawono.

One measurement tool available to evaluate the tax administration system is the Tax Administration Diagnostic Assessment Tool (TADAT). TADAT allows tax authorities to self-diagnose the strengths and weaknesses of the tax administration system compared to international best practices. Read ‘These are Results of Assessment Using TADAT at the DGT in 2021'.

“If implemented properly, coretax may facilitate business processes and improve the performance of our tax administration, resolving issues such as filing accuracy, tax declaration timelines and better tax dispute resolution. This is our major task in the future. Coretax is merely an intermediate step towards achieving measurable goals,” Bawono concluded. (sap)