Determinants of Tax Complexity in Tax Regulations and Tax Procedures - Evidence from a Developing Country

86 Pages Posted: 14 Aug 2024

See all articles by Adrian Schipp

Adrian Schipp

Paderborn University; TRR 266 Accounting for Transparency

Fernando Siahaan

WU Vienna University of Economics and Business

Caren Sureth-Sloane

Paderborn University; Vienna University of Economics and Business; TRR 266 Accounting for Transparency

Date Written: August 12, 2024

Abstract

This study investigates the determinants of tax complexity in Indonesia, focusing on the perspectives of tax officers and firms, providing a case study relevant to developing countries. Understanding tax complexity in these contexts is crucial, as developing nations frequently encounter legislative, fiscal, and administrative challenges that exacerbate tax complexity. Such complexity can potentially hinder investment, impair tax revenue collection, and impede overall economic development. We adapt a global survey instrument to Indonesia and collect responses from Indonesian tax officers and firms. We identify transfer pricing, statutory tax rates, and dividends as the most complex tax regulations. Tax law enactment and tax appeals are perceived as the most complex tax procedures. This is in part in contrast to the global evidence, where statutory tax rates, dividends, tax law enactment, and appeals are not perceived as highly complex on average. Furthermore, comparative analyses show that tax officers perceive tax regulations as more complex than tax procedures, for example, transfer pricing regulations. This is often due to ambiguity in the regulations. In contrast, firms perceive tax procedures as more complex than tax regulations, particularly tax audits. Our findings provide a nuanced picture of tax complexity in a developing country and helpful insights and guidance for tax reforms in Indonesia. They also serve as a starting point for further analysis of developing countries. 

Keywords: tax administration, tax complexity, business taxation, survey, developing country

JEL Classification: H20, H25, C83, K34

Suggested Citation

Schipp, Adrian and Siahaan, Fernando and Sureth-Sloane, Caren, Determinants of Tax Complexity in Tax Regulations and Tax Procedures - Evidence from a Developing Country (August 12, 2024). TRR 266 Accounting for Transparency Working Paper Series No. 151, WU International Taxation Research Paper Series No. 2024-05, Available at SSRN: https://ssrn.com/abstract=4924632

Adrian Schipp (Contact Author)

Paderborn University ( email )

Warburger Str. 100
Paderborn, 33098
Germany

TRR 266 Accounting for Transparency ( email )

Warburger Straße 100
Paderborn, 33098
Germany

Fernando Siahaan

WU Vienna University of Economics and Business ( email )

Welthandelsplatz 1, Building D1, 3rd Floor
Vienna, 1020
Austria

Caren Sureth-Sloane

Paderborn University ( email )

Warburger Str. 100
Paderborn, 33098
Germany

Vienna University of Economics and Business ( email )

Welthandelsplatz 1
Vienna, Wien 1020
Austria

TRR 266 Accounting for Transparency ( email )

Warburger Straße 100
Paderborn, 33098
Germany

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