View of Evaluation of Tax Audit Effectiveness Factors in Jakarta Regional Tax Office

(1)

DOI: 10.31289/jab.v9i2.9817

JURNAL AKUNTANSI DAN BISNIS

Jurnal Program Studi Akuntansi

Available online http://ojs.uma.ac.id/index.php/jurnalakundanbisnis

Evaluation of Tax Audit Effectiveness Factors in Jakarta Regional Tax Office

Frita Melliniawati*, & Mulyono

Program Studi Akuntansi, Fakultas Bisnis dan Manajemen, Universitas Indonesia, Indonesia

Submitted: June 16, 2023; Reviewed: October 9, 2023; Accepted: October 25, 2023

*Coresponding Email: [email protected]

Abstract

Tax audit emerges as a form of control conducted by the Directorate General of Taxes to test taxpayer compliance towards implementing the self-assessment system. According to deterrence theory, taxpayer compliance is highly dependent on cost-benefit analysis, whereby the benefits of complying outweigh the consequences of not complying. Therefore, conducting an effective tax audit is important to increase taxpayer compliance. This study aims to evaluate the causes of the declining tax audit effectiveness based on the Audit Coverage Ratio (ACR) trend in the North Jakarta Regional Tax Office in 2019-2021 by using seven determinant factors of tax audit effectiveness as benchmarks. These factors are then divided into five categories, namely Top Management Support (financial budget adequacy, supporting facilities availability, professional training adequacy), Tax Auditor (Tax Auditor personnel sufficiency and workload), Technology (information system adequacy), and Taxpayers (taxpayers’ cooperativeness). This study used a descriptive-qualitative method by employing document analysis, questionnaires, and interviews. The results point out several issues that have led to the decline in the tax audit effectiveness in the North Jakarta Regional Tax Office, such as inadequate supporting facilities, ineffective professional training, insufficient tax auditor personnel, and lack of integration and accessibility on the existing information systems.

Keywords: Audit Coverage Ratio, Tax Audit Effectiveness, Deterrent Effect, Tax Compliance.

How to Cite: Melliniawati, F. & Mulyono. (2023). Evaluation of Tax Audit Effectiveness Factors in Jakarta Regional Tax Office. Jurnal Akuntansi dan Bisnis : Jurnal Program Studi Akuntansi.

9 (2): 118-130

(2)

INTRODUCTION

Tax audit emerges as a result of the trust that the Directorate General of Taxes (DGT) has given to taxpayers in the form of implementing a self-assessment system (SAS) (Kamaruddin et al., 2022). Implementing SAS is intended to simplify the tax assessment system and encourage voluntary taxpayer compliance (Adane, 2020). However, taxpayers tend to be reluctant to pay their tax obligations voluntarily, and thus, through tax audits, tax authorities create a situation where taxpayers will be motivated to pay their tax obligations, either through persuasive or coercive means, which makes taxpayers forced to comply (enforced tax compliance) (Mendoza et al., 2017; Olaoye et al., 2018). Tax audit activity is a form of control from the DGT to verify and ensure that the information in tax return is accurate and follows applicable tax standards.

Tax audit is essential in terms of helping the government collect the right amount of tax revenue for the financial budget, maintaining economic order and stability, ensuring the provision of appropriate restitution, organizing the level of tax evasion and violations, increasing the level of taxpayer compliance, and ensuring that the amount to be paid has been collected and deposited to the government (Olaoye et al., 2018). By conducting tax audits, tax obligations can be easily determined and things that need to be adjusted can be identified (Bosco Harelimana, 2018). Meanwhile, Kasper & Alm (2022) revealed that tax audit activities have direct and indirect impacts. Regarding the direct impact, tax audits can increase revenue by determining additional tax, interest, and fines from audited taxpayers. As for the indirect impact, there is the deterrence effect that prevents taxpayer non-compliance in the future, both for taxpayers who are audited (special prevention) and taxpayers who are not (general prevention). A study by Hebous et al. (2023) proved these statements by stating that after an audit, the average taxpayer immediately reduces their tax deduction claim in the following year, demonstrating increased compliance. This increase in compliance can be explained by deterrence theory, where taxpayers tend to comply when the benefits obtained from infringing are lower than the consequences (Marques et al., 2020).

Thus, it can be concluded that the higher the tax audit is, the higher the level of taxpayer compliance will be in the future in carrying out their tax obligations, leading to an increase in tax revenue. However, in the Indonesian context, this is not the case. One of the indicators used by DGT to measure the effectiveness of tax audits in Indonesia is the Audit Coverage Ratio (ACR). ACR calculates the amount of audit coverage by comparing the number of taxpayers audited with the total number of registered taxpayers obliged to submit tax returns. Figure 1 shows the ACR trend in the North Jakarta Regional Tax Office in 2019-2021. During 2019-2021, the ACR trend continued to decline consecutively. This decline signifies a decrease in tax audit frequency conducted on taxpayers, indicating a diminished level of monitoring carried out by DGT. Therefore, the decrease in tax audit frequency will lead to a greater possibility of taxpayers committing tax fraud, thus reducing the potential state revenue.

Figure 1. Audit Coverage Ratio (ACR) of the North Jakarta Regional Tax Office Source: Processed data from DGT’s Internal Data

3.92%

1.54% 1.38%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

2019 2020 2021

(3)

Based on this phenomenon, the author is encouraged to conduct further evaluation to identify the factors that have caused the decline in tax audit effectiveness in the North Jakarta Regional Tax Office for three consecutive years. According to Chalu & Mzee (2018), there are five main factors that determine the effectiveness of tax audits, namely the implementation of recommendations from Tax Auditors by top management, the adequacy of tax audit personnel, taxpayer behavior toward tax audits, the availability and application of tax audit regulations, and leadership and tax policy for tax audits. This research was based on 23 tax regions in Tanzania by using an explanatory approach. In the case of one of the tax offices in Ethiopia, the determinants of tax audit effectiveness identified by Nurebo et al. (2019) are management support, audit quality, taxpayer awareness, and an integrated tax administration system. Still in the same country but with a different work unit, Adane (2020) successfully identified that management support, Tax Auditors’ competence and independence, taxpayer awareness level, and taxpayer attitude determine tax audit effectiveness. Meanwhile, in the Indonesian context, Andri et al.

(2021) found that top management support, taxpayer attitudes, and information systems affect the effectiveness of tax audits. This study uses ACR as one of the indicators of tax audit effectiveness. Specifically, this study focuses on Large Taxpayers Regional Tax Office, Jakarta Special Regional Tax Office, Jawa Barat I Regional Tax Office, and 29 work units under those working areas.

By conducting a case study type of research, Wahyudin et al. (2022) evaluated the implementation of tax audits at Large Tax Office Four. They found that tax audit implementation has not effectively supported tax revenue. This is due to (1) limited facilities and infrastructure; (2) insufficient supporting data; (3) unpleasant feelings caused by mutation; and (4) insufficient Tax Auditors personnel. In another case study research on a broader research subject, Marlisza & Yulianti (2022) revealed that the causes of the relatively low ACR in Indonesia are (1) the unequal number of tax audit personnel with the number of taxpayers; (2) the inadequate training programs; (3) the imperfect implementation of promotion and mutation system; (4) the lack of integration of information technology system; (5) the lack of data provided by taxpayers and external parties in supporting tax audit activities; and (6) the lack of communication with other sections. This study has limitations in using ACR nationally as the research object and combining DGT in the work unit locations of Sumatra, Java, and Kalimantan as the research subject. These limitations also appear in Wahyudin et al. (2022), which combines tax offices in several working areas. In reality, the ACR in each regional tax office is different as well as the factors that influence it, so it is inappropriate to not use a specific ACR in the regional tax office as the research subject and not separate the DGT’s work unit location as the research subject. These limitations encourage the authors to fill these gaps by using the ACR trend in the North Jakarta Regional Tax Office as the research object and all DGT’s work units in North Jakarta as the research subject, which consists of one regional tax office, two medium tax offices, and six small tax offices.

This study, therefore, aims to evaluate the causes of the declining tax audit effectiveness in the North Jakarta Regional Tax Office in 2019-2021 via an in-depth case study. By referring to the results of prior studies, seven determinant factors of tax audit effectiveness are used as benchmarks divided into four categories, namely Top Management Support (financial budget adequacy, supporting facilities availability, professional training adequacy), Tax Auditor (Tax Auditor personnel sufficiency and workload), Technology (information system adequacy), and Taxpayers (taxpayers’

cooperativeness). Moreover, to the best of the authors’ knowledge, this is the first time that the declining tax audit effectiveness in one specific working area has been evaluated qualitatively.

Empirically, this study provides some considerations for DGT to improve the identified factors responsible for the ineffectiveness of tax audits so future performance can be improved and a deterrent effect on taxpayers will be achieved, thereby optimizing

(4)

tax revenue. This research also responds to the suggestions and recommendations provided by Chalu & Mzee (2018), Drogalas et al. (2015), and Nurebo et al. (2019) to include the taxpayer's perspective into the research, which in this study will be represented by Tax Consultant. In addition, this study also included the Directorate of Audit and Collection of the DGT as a regulator to support the research analysis.

RESEARCH METHOD

This research uses a descriptive-qualitative method with a case study type of research. The reason for using a case study is that this study wants to get a deeper understanding of the causes of the declining tax audit effectiveness in the North Jakarta Regional Tax Office in 2019-2021 by focusing on the determinants of tax audit effectiveness based on the findings in prior studies as benchmarks. Table 1 summarizes the determinants of tax audit effectiveness used in this study.

Table 1. The Determinants of Tax Audit Effectiveness No

. Category Subcategory References

1. Top

Management Support

Financial budget adequacy Abera (2016); Chalu & Mzee (2018) Supporting facilities availability Andri et al. (2021); Chalu & Mzee (2018) Professional training adequacy Abera (2016); Andri et al. (2021); Chalu &

Mzee (2018); Drogalas et al. (2015) 2. Tax Auditor Tax Auditor personnel sufficiency Chalu & Mzee (2018)

Workload Chalu & Mzee (2018)

3. Technology Information system adequacy Andri et al. (2021); Drogalas et al. (2015);

Nurebo et al. (2019)

4. Taxpayers Taxpayers’ cooperativeness Adane (2020); Andri et al. (2021); Chalu &

Mzee (2018) Source: Processed data from various sources

This study used primary and secondary data to collect data and information related to the study. Primary data was obtained by using questionnaires and interviews. The questionnaire contains eight closed-ended questions consisting of positive and negative questions, where respondents are required to choose answers from a set of alternative options provided (Dalati & Marx Gómez, 2018) designed using a five-point Likert scale.

The questions are adopted from various studies (see Table 1) by making some adjustments. This questionnaire is an internet-based survey distributed in the form of a Google form link via WhatsApp app to 213 Tax Auditors in nine of DGT’s work units in North Jakarta, out of which 99 questionnaires were returned, representing a response rate of 46 percent. As for interviews, semi-structured interviews were conducted and involving various interviewees, such as Tax Auditors in DGT’s work units in North Jakarta, Tax Auditors at the Directorate of Audit and Collection of the DGT as the regulator, and Tax Consultants as the representatives of taxpayers. Table 2 and Table 3 show detailed information about the interviewees involved in this research.

Table 2. Interviewee Details of Tax Auditor

Work Unit Interviewee’s Code Length of Working

Experience as TA Interview Duration Directorate of Audit and Collection TA01 6 – 10 years +40 minutes

North Jakarta Regional Tax Office TA02 15 years +40 minutes

TA03 5 years +40 minutes

TA04 6 – 10 years +70 minutes

(5)

North Jakarta Medium Tax Office Two TA10 6 – 10 years +75 minutes

Tanjung Priok Small Tax Office TA12 6 – 10 years +60 minutes

Kelapa Gading Small Tax Office TA14 6 – 10 years +50 minutes

TA15 6 – 10 years +100

minutes

Penjaringan Small Tax Office TA16 11 – 15 years +65 minutes

Koja Small Tax Office TA17 5 years +50 minutes

Source: Processed data

Table 3. Interviewee Details of Tax Consultant

Interviewee’s Code Length of Working Experience as TC Interview Duration

TC01 15 - 20 years +30 minutes

TC02 20 years +80 minutes

Source: Processed data

As for secondary data used in this study, it is obtained from publicly available data from the DGT website, namely the DGT Performance Report, as well as internal data from the Directorate of Audit and Collection of the DGT and the North Jakarta Regional Tax Office, which the obtainment requires special permission.

To analyze data, the technique used in this study is the interactive model developed by Miles et al. (2019) (see Figure 2). The components of data analysis contained in this model are (1) data reduction: summarizing, sorting, and focusing on essential points that are relevant to find patterns; (2) data display: organizing data in a concise form, such as tables, graphs, charts; (3) drawing conclusion and verification. In this model, data analysis is carried out continuously and iteratively until the data becomes saturated.

Figure 2. The Components of Data Analysis: An Interactive Model Source: Miles et al. (2019)

RESULTS AND DISCUSSION Top Management Support

This category comprises three factors: financial budget adequacy, supporting facilities availability, and professional training adequacy. The results of each of these factors will be explained accordingly. The first factor to be explained is the financial budget adequacy. In the tax audit context, a financial budget is needed for official travel in conducting the audit field. Figure 3 below shows the variety of Tax Auditors’ responses regarding the financial budget adequacy.

(6)

Figure 3. Responses Regarding Financial Budget Adequacy Source: Processed data from the questionnaire result

As shown in Figure 3 above, there is a large percentage of “agree” responses regarding the financial budget adequacy. Based on this result, it can be concluded that most respondents felt that the financial budget available has been adequate in supporting tax audits. This result was then confirmed by the interviewees, who all expressed similar opinions.

“For official travel, it is still adequate. As long as there is a Letter of Assignment and evidence of going to the field, it will always be reimbursed by the office.” (TA07)

Although the overall budget is already adequate, usually during the year-end period, the available financial budget is getting thinner. This can occur since field audits cannot be planned along with budget preparation. As a result, some of the submitted Letters of Assignment and Letters of Official Travel were held up due to budget savings. Only urgent field audits, such as those that will be due soon or generate large revenue potential, are prioritized.

In addition, the budget depletion during the year-end period also affects the days given to Tax Auditors to conduct field audits. Meanwhile, some taxpayers’ locations are located in areas that require a long travel time. The time constraint then requires Tax Auditors to maximize the available time by conducting tax audits after working hours. In overcoming this obstacle, Tax Auditors usually implement several strategies, such as maximizing official travel before the end of the year, reducing the number of audit team personnel going to the field, or visiting taxpayer offices that are located nearby.

The next factor to be discussed is supporting facilities availability. In carrying out tax audits, several supporting facilities are needed, such as computers, laptops, flash disks, printers, scanners, and vehicles. Figure 4 below shows the variety of Tax Auditors’

responses regarding the supporting facilities availability.

Figure 4. Responses Regarding Supporting Facilities Availability Source: Processed data from the questionnaire result

24%

49%

15%

8%

4%

Strongly Agree Agree

Neutral Disagree

Strongly Disagree

33%

19%

37%

11%

Agree Neutral Disagree

Strongly Disagree

(7)

As shown in Figure 4 above, there is a large percentage of “disagree” responses regarding the supporting facilities availability. Therefore, it can be concluded that most respondents considered that top management did not provide adequate facilities to conduct tax audits. One of the facilities that is currently still inadequate is the number of official cars available. It is informed that the North Jakarta Regional Tax Office only has one car for each department, while the tax offices under its working area only have one to two official cars for each office. However, the audit section consists of several teams with different agendas, thus often making them unable to use their official cars. To resolve this, Tax Auditors use their personal vehicles to conduct official travel, where the expenses incurred for using them will be reimbursed by the office.

“For us, the obstacle that we face now is the official car. In several times we use our own car since the official cars are sometimes not available because others are using them.”

(TA02)

Other facilities that are still inadequate are laptop and computer specifications. The problem lies in the lack of RAM capacity, so they do not have sufficient ability to process large-size data. As a result, the laptop will become slow and cause the audit process to be hampered. It is also informed that some office computers were procured several years ago, so the specifications are not up to date with the current development. New procurements are also not evenly distributed due to budget constraints. Therefore, Tax Auditors either upgrade their RAM or use their personal laptops to overcome these problems.

“[...] because unfortunately, our computers are outdated. So, usually some of us buy our own laptops or upgrade our RAM.” (TA10)

The last factor to be discussed in this category is professional training adequacy.

Chalu & Mzee (2018) and Drogalas et al. (2015) found that educated and trained Tax Auditors are more capable of improving tax audit effectiveness. Therefore, training is mandatory for Tax Auditors to improve their competency and professionalism. Training held by DGT also provides credit scores for promotion to a higher position. As for training topics and the participants were determined based on the training needs analysis and performance assessment results. Figure 5 below shows the variety of Tax Auditors’

responses regarding professional training adequacy.

Figure 5. Response Regarding Professional Training Adequacy Source: Processed data from the questionnaire result

As shown in Figure 5 above, there is a large percentage of “agree” responses regarding professional training adequacy. Therefore, it can be concluded that most respondents felt that top management always provides support in providing adequate training to improve their competence and professionalism in carrying out tax audits.

Since Covid-19, training has been conducted online, which is favored by DGT for being more budget-efficient. Therefore, it is reasonable that the number of training held and participants is greater than when conducted offline in Taxes Education and Training Center. Even though it is held online, Tax Auditors still must conduct it in their office. The problem is that Tax Auditors are still required to work despite being discharged from duty to attend training. This mechanism makes training ineffective and redundant since the

29%

67%

3% 1%

Strongly Agree Agree

Neutral Disagree

(8)

knowledge provided cannot be absorbed optimally by Tax Auditors. Meanwhile, Adane (2020) found that if training is carried out effectively, Tax Auditor’s competence in finding irregularities can increase, thereby leading to effectiveness in tax audits.

“[...] the positive side is that there are many opportunities, while the negative side is because we are in the office sometimes the leader still commands us to work.” (TA13)

Tax Auditors who become office representatives must re-explain the training material to their colleagues. Sometimes, delivering information through this method is prone to information reduction. A person's ability to communicate can also be different, so it becomes an obstacle for other Tax Auditors who do not have the opportunity to participate directly to obtain new knowledge. Tax Auditors who do not participate may also have questions the representative had not previously considered. As a result, knowledge absorption becomes uneven and does not run effectively for Tax Auditors. To overcome these obstacles, Tax Auditors often ask questions to the training group on WhatsApp or other work units or hold In-House Training (IHT) in their offices by inviting previous speakers as trainers.

Tax Auditor

This category consists of two factors: Tax Auditor personnel sufficiency and workload. The results of each of these factors will be explained accordingly. The first factor to be explained is Tax Auditor personnel sufficiency. Table 4 below shows a comparison of the Number of Tax Auditors with the Number of Taxpayers in the North Jakarta Regional Tax Office.

Table 4. The Comparison of the Number of Tax Auditors with the Number of Taxpayers in the North Jakarta Regional Tax Office

Years Number of Tax Auditors Number of Taxpayers Ratio

2019 178 348,909 0.051%

2020 226 288,646 0.078%

2021 214 290,585 0.074%

Source: Processed data from DGT’s Internal Data

From the ratio results shown in Table 4, it can be concluded that there is a disproportionate number between Tax Auditors and taxpayers in the North Jakarta Regional Tax Office’s working area in 2019 - 2021, where the number of Tax Auditors is less than the number of taxpayers.

Prior studies also highlighted the same issue (Marlisza & Yulianti, 2022; Wahyudin et al., 2022), where the current number of Tax Auditor personnel is insufficient. It cannot be denied that the number of Tax Auditor personnel also affects the number of audits carried out; therefore, it will affect the ACR level as the indicator of tax audit effectiveness.

This is also in line with the result found by Chalu & Mzee (2018), which stated that a sufficient number of Tax Auditor personnel could increase the effectiveness of tax audits.

To address the issue, adding more Tax Auditors personnel cannot be done since the Ministry of Finance has implemented a zero growth or minus growth policy, where every year, the number of employees will be reduced despite the increasing number of taxpayers. One of the reasons behind this is budget efficiency. It is also informed that Tax Auditors have special allowances; therefore, an increase in Tax Auditors personnel will lead to an increase in the budget related to salaries and allowances. Thus, adding more Tax Auditors personnel will not likely happen.

“The obstacle is the budget since Tax Auditor has a special budget, namely special allowances.” (TA06)

(9)

Another reason that hinders the addition of Tax Auditors personnel is the requirement of specific competencies that the DGT employees cannot easily fulfill. For the first appointment, the employee is required to attend and pass the training, while the appointment through transfer from other positions and promotion is required to take and pass the competency test.

Ideally, each taxpayer should be audited at least once every five years to create a deterrent effect for taxpayers. The obstacles in adding more personnel then raise a challenge of how the number of tax audits can continue to increase while the number of Tax Auditors is limited. Several possible ways to overcome these obstacles are by transferring employees from other business processes to audit function or focusing the audit on specific sectors with the most significant tax potential.

The next factor to be discussed is Tax Auditor’s workload. The workload is the amount of work carried out by each Tax Auditor that needs to be completed in a given time. Tax Auditor’s workload is represented by the converted Audit Report, which is the target/standard of completion that becomes the tax auditor’s performance measure.

Figure 6 below shows the various Tax Auditors’ responses regarding their workload condition.

Figure 6. Responses Regarding Tax Auditor’s Workload Source: Processed data from the questionnaire result

As shown in Figure 6 above, there is a large percentage of “agree” responses regarding the workload. Therefore, it can be concluded that most respondents felt that the workload is in accordance with their capacity. Based on the interview results, it was found that the disproportionate number between Tax Auditors and taxpayers does not necessarily make Tax Auditor’s workload very extensive. This finding is consistent with Marlisza & Yulianti (2022), stating that Workload Analysis conducted by DGT has been done effectively since Tax Auditors do not felt overloaded.

The workload has been determined in a certain way based on the consideration of the capacity of each Tax Auditor through Workload Analysis. Workload analysis is a systematic management technique to obtain information on work efficiency and effectiveness based on work volume. Briefly, Tax Auditor’s workload will continue to be evaluated continuously through workload analysis. Thus, if many Tax Auditors do not achieve the target, the workload will be reduced, and the same applies the other way around. Therefore, in order to be able to achieve the target and optimize tax revenue with limited human resources, the audit is carried out based on the Audit Priority Target List.

Technology

The factor that falls into this category is information system adequacy. According to Drogalas et al. (2015), the use of information systems allows Tax Auditors to track tax violations properly, hence increasing the effectiveness of tax audits. Figure 7 below shows the variety of Tax Auditors’ responses regarding the adequacy of information system to support tax audit activities.

31%

56%

6%

7% Strongly Agree

(10)

Figure 7. Response Regarding Information System Adequacy Source: Processed data from the questionnaire result

As shown in Figure 7 above, there is a large percentage of “agree” responses regarding information system adequacy. Therefore, it can be concluded that most respondents felt that the current information systems adequately supports tax audit activities. Although it has been adequate, some obstacles still occur in the existing information systems. One of the obstacles is the lack of information systems integration.

As stated by DJP (2018), there are multiple information systems used by Tax Auditors to support their work, such as SIDJP (DGT Information System), Appportal, Approweb, Supervisory Summary menu, e-audit Utilities, and Tax Audit Management Application.

Each of these information systems works separately, thereby creating interoperability limitations. This finding is in accordance with Marlisza & Yulianti (2022), stating that currently available information systems are complicating rather than facilitating and supporting Tax Auditors’ task. This is because the non-integrated information systems require Tax Auditors to collect data manually, which causes inefficiency that leads to a decrease in Tax Auditor’s productivity level.

“Yes, the information systems have been quite adequate. But maybe the integration can be improved. [...] so far, there are several applications that work separately.” (TA02)

This matter is expected to be solved by the new information system design called Core Tax Administration System (CTAS) that will be scheduled to launch at the beginning of 2024. This is a digital transformation project where all existing information systems will be integrated into one system. With this new-integrated information system, Tax Auditors can work efficiently, thereby increasing their productivity and capability in conducting tax audits.

Besides the lack of integration, another obstacle in the existing information systems is the lack of accessibility. It is informed that there is limited authorization to access taxpayers’ data, specifically data outside Tax Auditor’s working area. This is due to the regulation that obliges DGT’s employees to maintain taxpayers’ confidentiality, as stated in Undang-Undang Ketentuan Umum dan Tata Cara Perpajakan (2007) Article 34 paragraph (1). In order to be able to obtain taxpayers’ data outside Tax Auditor’s working area, a correspondence process with the relevant working area is required, which sometimes takes a long time to be fulfilled. As a result, this prevents Tax Auditors from working efficiently, thus affecting their productivity. A frequently used method to address this issue is requesting data through informal methods, such as by phone calls or text messages if Tax Auditor has a relative in the work unit whose data is to be requested. Thus, the data can be obtained more quickly, while the formal method still proceeds.

Taxpayer

The factor that falls into this category is the taxpayers’ cooperativeness. According to Adane (2020), Andri et al. (2021), and Chalu & Mzee (2018), taxpayers’ cooperativeness towards tax audits can affect the effectiveness of tax audits since it will accelerate the audit process and increase the audit quality. By cooperative, this study refers to the fulfillment

24%

59%

10%

7% Strongly Agree

(11)

of all obligations that taxpayers must do during the audit as stipulated in Peraturan Menteri Keuangan Nomor 17 Tahun 2015 regarding the Audit Procedures in Article 14 Paragraphs (1) and (2). Figure 8 below shows the variety of Tax Auditors’ responses regarding taxpayers’ cooperativeness.

Figure 8. Response Regarding Taxpayers’ Cooperativeness Source: Processed data from the questionnaire result

As shown in Figure 8 above, there is a large percentage of “agree” responses regarding the taxpayers’ cooperativeness. Therefore, it can be concluded that most taxpayers in the North Jakarta Regional Tax Office’s working area are cooperative when tax audit is conducted towards them.

Regarding non-cooperative taxpayers, apart from deliberately making mistakes from the beginning, they are also caused by the misconception of the tax audit. Some taxpayers presume that if they are being audited, it means they have made mistakes and will be asked to pay more tax. Prior study also found similar result (Adane, 2020), stating that lack of awareness is one reason that drives taxpayers to refrain from cooperating during tax audits. In principle, Tax audit is conducted to test taxpayers’ compliance and do not automatically indicate they are at fault. Tax Audits can also be regarded as a tool to educate taxpayers so that the same mistakes will not be repeated.

“They [non-cooperative taxpayers] usually misperceive the tax audit. Until now, many people still think that if they are being audited, they have made mistakes and will be asked to pay more tax.” (TA11)

There are several obstacles faced by Tax Auditors when dealing with taxpayers. One of them is the taxpayers’ poor data management. Sometimes when taxpayers are requested to lend some documents, it cannot be fulfilled since the documents are no longer exist. Some reasons behind it are that the employee responsible for the documents is no longer works at the taxpayer’s place or because the taxpayer’s device where the documents are kept has been lost or malfunctioned. These results is consistent with Wahyudin et al. (2022), which stated that since tax audit is a post-audit, therefore the documents needed are already obsolete and hard to find. Some taxpayers also argue that they do not have adequate bookkeeping when requested to lend some documents, which makes it similar to the result found by Syahlan & Martani (2022), thereby hampering the tax audit process. These may happen either truly caused by their ignorance of the obligation to retain data for ten years or just an excuse to stall time so that the Tax Auditors cannot access their documents.

Another obstacle that Tax Auditors often face is the inability to find taxpayers at the registered address. When visited, sometimes the address is vacant or belongs to someone other than the taxpayer. This incident provides two possibilities, either it is a fake address, or the taxpayer has moved to another address and does not update the address registered in the tax database.

Meanwhile, from the taxpayers’ perspective represented by tax consultants, it is found that one of the factors that influence taxpayers’ cooperativeness is the

14%

47%

26%

13% Strongly Agree

(12)

communication conducted by Tax Auditors. Sometimes the communication delivered by Tax Auditor is improperly conveyed to the taxpayers. This can happen since everyone has different communication styles to approach others. Interviewee TA09 also acknowledged this and added that it would be an obstacle if Tax Auditor could not communicate properly.

“[...] sometimes there are also some Tax Auditors whose communication style is stiff and harsh when we are supposed to educate taxpayers.”

To address this issue, DGT provides several solutions, such as conducting communication skill training to educate Tax Auditors on how to communicate properly with taxpayers and distributing questionnaires or doing correspondence via phone calls to taxpayers after Tax Audit is completed. The results received will then be used to evaluate Tax Auditor.

CONCLUSION

According to deterrence theory, taxpayer compliance is highly dependent on cost- benefit analysis, whereby the benefits of complying outweigh the consequences of not complying. Therefore, conducting an effective tax audit is important to increase taxpayer compliance.

After conducting research using questionnaires and interviews, this study found several issues that have led to the decline in the tax audit effectiveness that can affect taxpayer compliance in the North Jakarta Regional Tax Office in 2019-2021. These issues are inadequate facilities in supporting tax audit activities, ineffective professional training that results in non-optimal absorption of knowledge provided, insufficient tax auditor personnel to audit all taxpayers, and lack of integration and accessibility on the existing information systems that lead to inefficiency and causing a decrease in Tax Auditor’s productivity level.

To address these issues, this study provides some considerations for DGT so that tax audit effectiveness can increase and the deterrent effect that will lead to voluntary compliance will be achieved, thereby optimizing tax revenue. First, improve the forecasting method for budget allocation, especially regarding the procurement of supporting facilities for tax audits. Second, re-conduct offline training at the Taxes Education and Training Center.

Third, increase the number of Tax Auditor personnel by transferring employees from other business processes to the audit section. An implication is expected when executing this solution, such as employee shortages in work units on related business processes.

Limited financial budgets may also hinder the implementation of this recommendation.

Therefore, to implement this recommendation, DGT must also overcome these obstacles by streamlining the organizational structure by identifying work units that are operating ineffectively, providing training to increase employee productivity, and adopting new technology to improve work efficiency. Fourth, ensure the reliability and launching timeliness of the Core Tax Administration System (CTAS) to increase the productivity and capability of Tax Auditors in conducting tax audits.

Compared to previous study, this study is the first time that the declining tax audit effectiveness in one specific DGT’s working area has been evaluated qualitatively.

Nevertheless, this study still has limitation as it only involves Tax Auditors in six out of nine DGT’s work units in North Jakarta as interviewees. This is due to the limited access provided when the study was conducted. Further study is expected to involve all DGT’s work units in a specific working area to increase the research’s validity.

(13)

REFERENCES

Abera, M. (2016). Factors Affecting Tax Audit Effectiveness Evidence From Large Tax Payers Office Of Ethiopian Revenue And Customs Authority (Based on Auditors perception). Addis Ababa University.

Adane, A. B. (2020). Determinants of Tax Audit Effectiveness: In Case of Gondar Zone Revenue Offices.

Research Journal of Finance and Accounting, 11(23), 22–37. https://doi.org/10.7176/rjfa/11-23-03 Andri, M., Winarningsih, S., & Devano, S. (2021). Efektivitas Pemeriksaan Pajak di Indonesia. Balance : Jurnal

Akuntansi Dan Bisnis, 6(1), 41–54. https://doi.org/10.32502/jab.v6i1.3404

Bosco Harelimana, J. (2018). Effect of Tax Audit on Revenue Collection in Rwanda. Research Journal of Finance and Accounting, 7(1), 1138–1148.

Chalu, H., & Mzee, H. (2018). Determinants of tax audit effectiveness in Tanzania. Managerial Auditing Journal, 33(1), 35–63. https://doi.org/10.1108/MAJ-06-2016-1390

Dalati, S., & Marx Gómez, J. (2018). Surveys and Questionnaires. In The Routledge Handbook of Research Methods in the Study of Religion (pp. 175–186). Springer International Publishing.

https://doi.org/10.1007/978-3-319-74173-4_10

Drogalas, G., Loannis, S., Dimitraa, K., & Ioannis, D. (2015). Tax audit effectiveness in Greek firms: Tax auditors perceptions. Journal of Accounting and Taxation, 7(7), 123–130.

https://doi.org/10.5897/jat2015.0186

DJP. (2018). Surat Edaran Direktur Jenderal Pajak Nomor SE-15/Pj/2018 Tentang Kebijakan Pemeriksaan.

Hebous, S., Jia, Z., Løyland, K., Thoresen, T. O., & Øvrum, A. (2023). Do Audits Improve Future Tax Compliance in the Absence of Penalties? Evidence from Random Audits in Norway. Journal of Economic Behavior

& Organization, 207, 305–326. https://doi.org/10.1016/j.jebo.2023.01.001

Kamaruddin, K., Faisal, A., & Agustam, M. R. (2022). The Effect of Tax Audit, Tax Collection, and Taxpayer Compliance Supervision on Increasing Tax Revenue at KPP Pratama Makassar Utara. Golden Ratio of Taxation Studies, 2(1), 36–46. https://doi.org/10.52970/10.52970/grts.v2i1.245

Kasper, M., & Alm, J. (2022). Audits, Audit Effectiveness, and Post-Audit Tax Compliance. Journal of Economic Behavior and Organization, 195(2021), 87–102. https://doi.org/10.1016/j.jebo.2022.01.003 Kementerian Keuangan Republik Indonesia. (2015). Peraturan Menteri Keuangan Republik Indonesia

Nomor 184/PMK.03/2015 tentang Perubahan atas PMK No. 17/PMK.03/2013 tentang Tata Cara Pemeriksaan.

Marlisza, D., & Yulianti. (2022). Analisis Audit Coverage Ratio dalam Rangka Meningkatkan Kinerja Pemeriksaan Pajak. 8(3), 228–251. https://doi.org/http://dx.doi.org/10.30998/jabe.v8i3.11417 Marques, J. A., Sousa, P., & Teixeira, G. (2020). Tax Audits as A Path to Tax Compliance in Portugal. European

Journal on Criminal Policy and Research, 26, 457–479.

https://doi.org/https://doi.org/10.1007/s10610-019-09417-3

Mendoza, J. P., Wielhouwer, J. L., & Kirchler, E. (2017). The Backfiring Effect of Auditing on Tax Compliance.

Journal of Economic Psychology, 62, 284–294. https://doi.org/10.1016/j.joep.2017.07.007

Miles, M. B., Huberman, A. M., & Saldana, J. (2019). Qualitative Data Analysis, A Methods Sourcebook. SAGE Publications.

Nurebo, Y. B., Lekaw, M. D., & W/Mariam, M. (2019). Effectiveness of Tax Audit: A Study in Kembata Tembaro Zone, Southern Ethiopia. International Journal of Commerce and Finance, 5(1), 34–50.

Olaoye, C. O., Ogunleye, S. A., & Solanke, F. T. (2018). Tax Audit and Tax Productivity in Lagos State, Nigeria.

Asian Journal of Accounting Research, 3(2), 202–210. https://doi.org/10.1108/AJAR-08-2018-0028 Republik Indonesia. (2007). Undang-Undang Nomor 28 Tahun 2007 Tentang Ketentuan Umum dan Tata

Cara Perpajakan.

Syahlan, D. R., & Martani, D. (2022). Evaluation of Tax Audit Effectiveness Case Study at Bengkulu Dua Tax Office. Contemporary Accounting Case Studies, 1, 105–127.

Wahyudin, D., Rahayuningtyas, I., Atmojo, A., Andrayanti, I., & Julina, F. (2022). The Effectiveness of Tax Audit as a Self Assessment System Supervision Measures and Tax Revenue Support (Study at the Large Tax Office 4). Ilomata International Journal of Tax and Accounting, 3(3), 258–271.

https://doi.org/https://doi.org/10.52728/ijtc.v3i3.501