The Impact of Pre-filled Tax Returns on Tax Compliance in Indonesia

• In Event: Tax System Design and Taxpayer Compliance

Abstract

Prefilled tax returns have been widely adopted by the OECD countries to enhance taxpayer compliance by simplifying tax filing and reducing compliance and administrative costs, including emerging countries such as Indonesia. Whilst prefilled tax returns offer benefits to taxpayers, they may also result in unintentional tax evasion due to reliance on prefilled data. This study utilises de-identified tax administration data from ten million Indonesian individual-level taxpayers over six years and employs a difference-in-differences (DiD) approach to assess the impact of prefilled tax returns on compliance for three income items. The findings indicate that prefilled tax returns increase overall tax compliance (e.g. net income); however, quantile analysis reveals that they may inadvertently contribute to a decline in other income items that are not prefilled (e.g. business income) Supporting prior studies, these results highlight the dual impact of prefilled tax returns, enhancing compliance while potentially affecting other non-prefilled income items.

Author

• Agustina Arumardi, Monash University