Abstract
From 2010 to 2020, Indonesia’s tax-to-gross domestic product (GDP) ratio has been declining. A tax-to-GDP ratio trend of this magnitude indicates that the tax authority lacks the capacity to collect taxes. The tax administration system’s modernization utilizing information technology is thus deemed necessary. Artificial intelligence (AI) technology may serve as a solution to this issue. Using the theoretical frameworks of innovations in tax compliance, the cost of taxation, success factors for information technology governance (SFITG), and AI readiness, this study aims to analyze the costs and benefits, the enablers and inhibitors, and the readiness of the government and related parties to apply AI to modernize the tax administration system in Indonesia. This study used qualitative approaches for the data’s collection and analysis. The data were obtained through a literature study and in-depth interviews. The findings show that AI application in the field of taxation can assist tax authorities in enforcing the law, provide taxpayers with convenience in fulfilling their tax obligations, improve justice for all taxpayers, and reduce tax compliance costs. The openness of Indonesia to technological developments, as evidenced by the AI National Strategy, is a supporting factor in the application of AI in Indonesia, particularly for the modernization of the tax administration system. The absence of specific regulations governing AI adoption, as well as a lack of human resources that can help the tax administration process, data, and infrastructure already support, are the impediments to implementing AI for the modernization of the tax administration system in Indonesia.
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Acknowledgments
The authors would like to thank the Editors-in-Chief (Kevin D. Ashley, Trevor Bench-Capon, Giovanni Sartor, and Matthias Grabmair) for the opportunity. We thank and value the detailed comments, input, hints, and directions, as well as the valuable and constructive feedback provided by anonymous reviewers. In addition, the anonymous reviewers’ helpful feedback greatly assisted us in clarifying our argument. All remaining errors are our responsibility. We would also like to thank all of the helpful informants who took part in this study. The authors acknowledge the Tax Governance and Accountability Research Cluster, Department of Fiscal Administration, Faculty of Administrative Sciences, Universitas Indonesia. Arfah Habib Saragih thanked the Directorate of Research and Development, Universitas Indonesia for supporting this study through the Q1 2021 International Publication Assistance Grant, with contract numbers NKB-531/UN2.RST/HKP.05.00/2021 and 1016/SK/R/UI/2021. Arfah Habib Saragih would also like to express her gratitude to her two teachers in the Accounting Information Systems Research Seminar class, Doctoral Program, Faculty of Economics and Business, Universitas Gadjah Mada, Mr. Syaiful Ali, MIS., Ph.D. and Mr. Sony Warsono, MAFIS, Ph.D., for facilitating, inspiring (including this study), and equipping her with various invaluable things, as well as showing the path and direction of her current and future research.
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Saragih, A.H., Reyhani, Q., Setyowati, M.S. et al. The potential of an artificial intelligence (AI) application for the tax administration system’s modernization: the case of Indonesia. Artif Intell Law 31, 491–514 (2023). https://doi.org/10.1007/s10506-022-09321-y
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DOI: https://doi.org/10.1007/s10506-022-09321-y