The Automatic Exchange of Information for Tax Purposes: Evidence from Transfer Pricing Cases in Indonesia

Karvina Widyo Palupi and Ica Rika Candraningrat

Journal of Tax Reform, 2024, vol. 10, issue 3, 609-627

Abstract: Cooperation between tax administrations is essential in combating tax avoidance and protecting the integrity of the tax system. A key aspect of such cooperation is the exchange of information. This research was aimed to test the Automatic Exchange of Information (AEoI) variable in moderating the influence of primary adjustments and secondary adjustments on the effectiveness of Transfer Pricing audits to carry out modern tax business processes, encourage sustainable tax revenue growth, increase sustainable taxpayer compliance, and preventing tax avoidance practices by taxpayers. The population of this research was 1852 Tax Assessment Letters obtained from the Directorate of Audit and Collection of the Directorate General of Taxes for the period 2020–2022. The sampling technique used was purposive sampling and a sample of 138 observations was obtained. This research uses Moderated Regression Analysis to analyze the interactions of AEoI with Primary and Secondary Adjustment. The analysis results provide evidence that approval of the Primary Adjustment and Secondary Adjustment as well as objections to the Secondary Adjustment influence the effectiveness of tax audits. Meanwhile, objections to the Primary Adjustment do not affect the performance of the tax audit. AEoI is unable to moderate the influence of the Primary Adjustment and Secondary Adjustment on the effectiveness of audits related to Transfer Pricing. Tax Return reported loss, non-taxable inbound AEoI data, low taxpayers’ ability to pay and double taxation from Tax Treaty Agreement between countries are factors that cause AEoI to not significantly increase the performance of tax authorities in Indonesia.

Keywords: AEoI; transfer pricing; effectiveness of tax audits; primary adjustment; secondary adjustment (search for similar items in EconPapers)
JEL-codes: F38 F55 H26 H71 M48 (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:aiy:jnljtr:v:10:y:2024:i:3:p:609-627

DOI: 10.15826/jtr.2024.10.3.187

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