Combating tax crimes in Indonesia: tackling the issue head-on

Abstract

Abstract Taxes are undeniably the lifeblood of a country’s financing. However, tax evasion is becoming increasingly rampant in Indonesia, resulting in substantial state losses. Enhanced tax enforcement policies are necessary to combat this crime. The Organization for Economic Cooperation and Development (OECD) has established principles for fighting tax crimes; however, the Indonesian government has been unable to integrate these principles into its tax enforcement policies, leading to gaps related to strategy, investigative powers, organizational structure, resources, and cooperation, which prevent the current measures from being fully effective. This article conducts a descriptive, evaluative, and comparative study of the Directorate General of Taxes’ (DGT) current tax enforcement policy and proposed practices based on the OECD’s principles to identify and elaborate on these gaps and analyse internal and external obstacles hindering effective implementation. This study’s findings reveal a fundamental difference between tax and legal interests that must be appropriately managed within their boundaries; therefore, the key to improving tax enforcement policy in Indonesia lies in combining Primum Remedium (criminal sanctions as the initial response) and Ultimum Remedium (criminal sanctions as the last resort) strategies. Additionally, the provision of adequate investigative powers, sufficient resources, gradual policy implementation, and necessary law amendments are also crucial factors. This study aims to provide the Indonesian government with insights and recommendations to enhance the tax enforcement policy, to combat tax crimes more comprehensively.