THE INFLUENCE OF CORPORATE TAXPAYER'S BUSINESS CHARACTERISTICS ON THE LEVEL OF COMPLIANCE IN FULFILLING INCOME TAX OBLIGATIONS BASED ON THE REPORTING COMPLIANCE APPROACH (STUDY AT THE SURABAYA DUA TAX INVESTIGATION AND INVESTIGATION OFFICE)

Title: THE INFLUENCE OF CORPORATE TAXPAYER'S BUSINESS CHARACTERISTICS ON THE LEVEL OF COMPLIANCE IN FULFILLING INCOME TAX OBLIGATIONS BASED ON THE REPORTING COMPLIANCE APPROACH (STUDY AT THE SURABAYA DUA TAX AUDIT AND INVESTIGATION OFFICE)

Author: Fuad Bambang Segara

Affiliations: Master of Accounting Study Program, Faculty of Economics and Business, Universitas Airlangga Surabaya

Publisher: Universitas Airlangga

Abstract

Realization of tax revenues both nationally and regionally at the Eastern Java Regional Office I continues to increase. On the one hand, the significant increase during the 2000-2004 period of 134.81% raises questions about the source of the cause. Tax analysts and practitioners suspect that the main source of cause is an increase in the level of taxpayer compliance.

On the other hand, this increase requires the Directorate General of Taxes to work harder so that this condition does not stop in the future. One effort that needs to be made is to know the map of taxpayer compliance in Indonesia. By knowing this compliance map, the focus of tax policy can be more focused so that policy can be more effective and efficient. The aim of this research is to determine the map of corporate taxpayer compliance in relation to business characteristics.

To measure the level of compliance, several approaches are known, including the Taxable Income Gap Approach, the Empirical Approach and the Late-Filing and Late-Payment Penalty Approach. The Reporting Compliance approach which measures the level of compliance based on the amount of tax actually paid compared to the amount that should be paid is part of the empirical approach because it uses real life data in its research. This approach is used by the Internal Revenue Service (US IRS) in The National Research Program (2000), which is a program aimed at finding out the tax gap or level of taxpayer compliance in the United States.

The business characteristics selected in the research consist of five types, namely the bookkeeping system used by corporate taxpayers, type of operating activities, market orientation, profit status and legal entity status. The same research was conducted by Chan and Mo (2002) in China with slightly different types of business characteristics (market orientation, profit status, production technology used). The selection of the five characteristics also cannot be separated from the availability of data in the tax audit database in Indonesia so that research can be carried out.

The level of compliance is measured based on the number of fiscal corrections found in a tax audit taking into account the business scale (sales volume). With this approach, the number of audit corrections reflects the level of violation of tax rules. The greater the number of fiscal corrections, the more non-compliant the audited taxpayer is with the applicable tax regulations. The same logic was used by Chan and Mo (2002) in research in China. This approach was also used by the IRS in 2000 with its National Research Program.

The research results prove that there is a significant simultaneous influence of business characteristics on the level of compliance in fulfilling Income Tax obligations. The coefficient of determination (R2) of 0.453 indicates that the variables of bookkeeping system, operational activities, market orientation, profit status and legal entity status explain variations in the level of compliance (Y) of 45.3%. Other variables that cannot be explained through research are 54.7%.

The research results also prove that there is a significant partial influence of each variable, namely bookkeeping system (X1), market orientation (X3) and profit status (X4) on the level of compliance. On the other hand, there is no significant influence of the operational activity variables (X2) and legal entity status (X5) on the level of compliance in fulfilling Income Tax obligations.

From the research results it can also be shown that the level of compliance is directly proportional to the variables X1, profit and legal entity status of a Limited Liability Company (PT) and a value of 0 (zero) for the category of Taxpayer who uses a manual bookkeeping system, type of trade/service activity, profit and loss status and legal entity status other than PT, companies that use the EDP bookkeeping system, type Manufacturing activities, profit and loss status and PT legal entity status have a higher level of compliance compared to companies that use manual bookkeeping systems, types of trading/service activities, profit and loss status and legal entity status other than PT.

On the other hand, the level of compliance is inversely proportional to the variable Domestic market oriented companies have a higher level of compliance than export market oriented companies.

From the results of the analysis of sales and cost correction data (reduction of gross income) it can be shown that the source of non-compliance tends to be cost manipulation rather than sales manipulation.

The results of this research show that companies with the characteristics of being relatively more structured and modern, open or transparent, professional, complex and serving a wider range of customers have a higher level of compliance than companies with the characteristics of being less structured, traditional, simple and serving a limited number of customers.

For this reason, it is recommended that the DGT should create a medium-long term program that will further direct or encourage the company to become a more structured and modern company, open, professional and growing. For example, by providing tax incentives for companies that maintain EDP bookkeeping by, for example, accelerating the depreciation period for the EDP installation system which includes hardware and software.

Education of Taxpayers should also be improved because there are indications that Taxpayers ignore or do not care about the correct regulations as long as the audit results do not result in an increase in the amount of tax payable or an outflow of cash.

Keywords: Corporate Taxpayer Business, Fulfillment of Income Tax Obligations

Sources: http://repository.unair.ac.id/34700/