Ilomata International Journal of Tax & Accounting P-ISSN: 2714-9838; E-ISSN: 2714-9846 Volume 5, Issue 1, January 2024 Page No. 162-179 162 | Ilomata International Journal of Tax & Accounting https://www.ilomata.org/index.php/ijtc Enhancing Tax Compliance in Indonesian Government Institutions: Identifying and Mitigating Inhibiting Factors Heriantonius Silalahi Directorate General of Taxes, Indonesia Correspondent: heri.silalahi@gmail.com Received : October 1, 2023 Accepted : January 4, 2024 Published : January 31, 2024 Citation: Silalahi, H. (2024). Enhancing Tax Compliance in Indonesian Government Institutions: Identifying and Mitigating Inhibiting Factors. Ilomata International Journal of Tax and Accounting, 5(1), 162-179. https://doi.org/10.52728/ijtc.v5i1.783 ABSTRACT: Tax compliance in Indonesian government institutions significantly affects national revenue and resource allocation. This study addresses tax non-compliance by identifying its causes and proposing mitigation strategies. The research aims to understand why government institutions in Indonesia struggle with tax compliance, with objectives including identifying inhibiting factors, assessing their impact, and proposing mitigation strategies. This integrated approach encompasses various elements, including a descriptive analysis approach, comprehensive literature research, comparative analysis, a qualitative research approach, and secondary data collection. Findings highlight complex regulations, inadequate tax education, and inconsistent enforcement as compliance hindrances. The study quantifies their impact. Proposed solutions include simplifying tax rules, enhancing tax education, and enforcing tax laws. In conclusion, this research informs policymakers, tax authorities, and government officials about tax compliance challenges, offering insights to improve tax collection and resource allocation, potentially increasing government revenue and promoting sustainable development. Keywords: Tax Compliance Factors, Government Institutions, Mitigation Strategies, Indonesian Taxation, Revenue Enhancement This is an open access article under the CC-BY 4.0 license. INTRODUCTION The State Budget (APBN) comprises five key components: State Revenue, State Expenditure, Primary Balance, Budget Surplus/Deficit, and Budget Financing. Among these components, State Revenue plays a pivotal role in maintaining economic stability. According to data from the official website of the Ministry of Finance (kemenkeu.go.id), the realization of tax revenue in the 2022 APBN reached Rp2.034.5 trillion, surpassing the target set in Presidential Regulation 98/2022, which was Rp1.784 trillion. This represents a substantial growth of 31.4% compared to the 2021 https://www.ilomata.org/index.php/ijtc mailto:heri.silalahi@gmail.com https://doi.org/10.52728/ijtc.v5i1.783 Enhancing Tax Compliance in Indonesian Government Institutions: Identifying and Mitigating Inhibiting Factors Silalahi 163 | Ilomata International Journal of Tax & Accounting https://www.ilomata.org/index.php/ijtc realization of Rp1.547.8 trillion. These figures underscore the significance of tax revenue as the largest pillar of the APBN. Tax revenue is collected through two mechanisms: the self-assessment system, where taxpayers calculate, pay, and report taxes themselves, and the withholding system, where taxes are deducted/collected by third parties such as marketplaces or government institutions (Ministry of Finance, 2022). Government institutions play a critical role in tax deduction and collection, particularly when transactions involve business partners, both Micro, Small, and Medium-sized Enterprises (MSMEs) and non-MSMEs. Hence, it is imperative for government treasury officials to accurately, comprehensively, and clearly perform tax calculations, deductions/collections, and reporting. There are still instances of inaccuracies in the practices of tax deduction, collection, and reporting by government treasury officials. These instances highlight the necessity for improved understanding and adherence to tax processes by government institutions to ensure that tax revenues are collected optimally. This, in turn, supports economic stability and the country's ongoing development. Indonesia's tax-to-GDP ratio in 2021 stood at 10.9%, which is below the Asia and Pacific (29) regional average of 19.8% by a significant margin of 8.9 percentage points. Additionally, it falls short of the OECD (Organization for Economic Co-operation and Development) average of 34.1% by a substantial 23.2 percentage points. This ratio in Indonesia increased by 0.8 percentage points from 10.1% in 2020 to 10.9% in 2021 (Ministry of Finance, 2022). Over the period from 2007 to 2021, Indonesia's tax-to-GDP ratio witnessed a decrease of 1.4 percentage points, declining from 12.2% to 10.9%. The highest recorded tax-to-GDP ratio during this period was 13.0% in 2008, while the lowest was 10.1% in 2020 (Ministry of Finance, 2022). https://www.ilomata.org/index.php/ijtc Enhancing Tax Compliance in Indonesian Government Institutions: Identifying and Mitigating Inhibiting Factors Silalahi 164 | Ilomata International Journal of Tax & Accounting https://www.ilomata.org/index.php/ijtc These figures highlight the need for Indonesia to further enhance its tax collection efforts to align with regional and global standards. Increasing the tax-to-GDP ratio can play a crucial role in generating government revenue, supporting economic development, and maintaining fiscal stability. Government revenues in Indonesia experienced a significant growth of 30.6%. This growth was underpinned by increased economic activity, the positive effects of implementing tax reforms (HPP law), and the rising prices of commodities. On the expenditure side, the government carefully optimized spending, reaching 99.5% utilization. This approach acted as a shock absorber to safeguard the economy and promote economic growth. The government has achieved significant milestones in its budget functions. It has successfully maintained moderate inflation rates and achieved robust economic growth, resulting in the https://www.ilomata.org/index.php/ijtc Enhancing Tax Compliance in Indonesian Government Institutions: Identifying and Mitigating Inhibiting Factors Silalahi 165 | Ilomata International Journal of Tax & Accounting https://www.ilomata.org/index.php/ijtc creation of 4.2 million new job opportunities. Progress has been made in reducing the poverty rate, nearing single-digit figures by September 2022. Despite the challenges posed by the Covid- 19 pandemic, income inequality, as measured by the Gini ratio, has been effectively managed. The country has sustained its Human Development Index (HDI), reflecting ongoing development, and has seen a decrease in child stunting rates. Furthermore, farmers have experienced improved terms of trade, enhancing their livelihoods (Downs & Stetson, 2014a). These accomplishments underscore the government's adept fiscal management in balancing economic stability, societal well-being, and development goals. Notably, both the deficit and Primary Balance have decreased substantially, returning to pre- pandemic levels. This positive shift was accompanied by more efficient budget financing mechanisms. It's worth noting that tax revenue includes receipts for all levels of government, and the "other taxes" category encompasses various taxes not directly related to income, profits, capital gains, social security contributions, or goods and services (Pu & Syu, 2023). In the context of the role of tax compliance by government institutions in development, the research "Enhancing Tax Compliance in Indonesian Government Institutions: Identifying and Mitigating Inhibiting Factors" should outline the research questions as follows: 1) What are the primary factors inhibiting tax compliance in Indonesian government institutions, and how do these factors affect the government's ability to support sustainable economic growth and reduce poverty levels? 2) To what extent do the impacts of these factors inhibiting tax compliance affect significant state revenue, effective income inequality management, and the achievement of other national development goals already attained by the Indonesian government? 3) What effective mitigation strategies can be proposed to address the factors hindering tax compliance within government institutions, with the aim of enhancing the government's role in supporting sustainable development, including improving social welfare, reducing poverty, and managing income inequality? METHOD The research will employ a comprehensive and multi-faceted research methodology to address the objectives of the study effectively. This integrated approach encompasses various elements, including a descriptive analysis approach, comprehensive literature research, comparative analysis, a qualitative research approach, and secondary data collection (Downs & Stetson, 2014b). These methodological components have been carefully selected to provide a holistic understanding of tax compliance issues within Indonesian government institutions and to facilitate the identification and mitigation of inhibiting factors. 1) Descriptive Analysis Approach: This aspect of the methodology will serve as the foundation for presenting information systematically. It will provide a structured framework for organizing https://www.ilomata.org/index.php/ijtc Enhancing Tax Compliance in Indonesian Government Institutions: Identifying and Mitigating Inhibiting Factors Silalahi 166 | Ilomata International Journal of Tax & Accounting https://www.ilomata.org/index.php/ijtc and communicating key findings related to tax compliance within Indonesian government institutions. 2) Comprehensive Literature Research: A thorough review of existing literature will be conducted to establish a solid understanding of tax compliance issues, both at the global level and within the Indonesian context. This literature review will inform the research and ensure that it is grounded in relevant theoretical and empirical perspectives. 3) Comparative Analysis: The research will incorporate comparative analysis, which involves benchmarking tax compliance practices within Indonesian government institutions against those in other relevant contexts or regions. This comparative approach will enable the identification of best practices and lessons learned from similar situations. 4) Qualitative Approach: The study will employ a qualitative research approach to gain nuanced insights into the inhibiting factors affecting tax compliance. Qualitative data collection techniques, such as interviews and surveys, will be utilized to capture in-depth perspectives and experiences related to tax compliance within government institutions. 5) Secondary Data Collection: Historical data related to tax compliance within Indonesian government institutions will be collected as part of the research. This secondary data will include tax records, legislative changes, compliance rates, and historical events that have shaped tax compliance practices over time. 6) Historical Data Analysis: Within the qualitative approach, there will be a specific emphasis on historical data analysis. This entails a detailed examination of past tax records and historical context to uncover patterns and trends in tax compliance behavior and its evolution. By combining these research methods, the study can provide a comprehensive and nuanced analysis of tax compliance issues within Indonesian government institutions. It allows for a holistic exploration of the inhibiting factors and their impact on government revenue, income inequality management, and broader development goals (Eichner & Pethig, 2018). Additionally, the qualitative and historical data components offer a rich qualitative context that complements quantitative analysis, providing a well-rounded understanding of the subject matter (Hsu & Liu, 2023a). Ultimately, this research methodology is designed to produce valuable insights and recommendations that can inform policymakers, tax authorities, and government officials in their efforts to enhance tax compliance and support sustainable economic development in Indonesia. RESULT AND DISCUSSION 1. Theoretical Framework The theoretical framework for this research on "Enhancing Tax Compliance in Indonesian Government Institutions: Identifying and Mitigating Inhibiting Factors" draws from various economic, behavioral, and institutional theories to provide a comprehensive lens for understanding tax compliance issues within government institutions (Hsu & Liu, 2023b). Here are the key components of the theoretical framework: https://www.ilomata.org/index.php/ijtc Enhancing Tax Compliance in Indonesian Government Institutions: Identifying and Mitigating Inhibiting Factors Silalahi 167 | Ilomata International Journal of Tax & Accounting https://www.ilomata.org/index.php/ijtc No Theoretical Framework Components Description and Relevance 1 Tax Compliance Theories a. Rational Choice Theory Individuals, including government officials, make decisions based on cost-benefit analysis. Relevant for understanding how cost- benefit perceptions influence tax compliance among government treasury officials. b. Social Norms Theory Social norms shape behavior. Investigates the impact of societal expectations and peer pressure on tax compliance practices within government institutions. c. Psychological Theories Examines cognitive and emotional factors (e.g., attitudes and motivations) that influence tax compliance decisions of government treasury officials. 2 Institutional Theories a. New Institutional Economics (NIE) Focuses on how institutions, including government structures and regulations, impact economic behavior. Relevant for understanding the institutional factors affecting tax compliance in government institutions. b. Principal-Agent Theory Explores the relationship between principals (government) and agents (government officials) and its impact on tax compliance behavior. Addresses information asymmetry and incentives. 3 Behavioral Economics a. Nudge Theory Behavioral interventions, like nudging, can improve tax compliance. Investigates the potential of behavioral strategies to enhance compliance among government officials. b. Anchoring and Framing Effects How tax compliance issues are presented and framed influences decision-making. Examines the role of cognitive biases in tax compliance. 4 Historical Perspective a. Historical Analysis Incorporates historical events and policy changes to understand the evolution of tax compliance practices within Indonesian government institutions over time. https://www.ilomata.org/index.php/ijtc Enhancing Tax Compliance in Indonesian Government Institutions: Identifying and Mitigating Inhibiting Factors Silalahi 168 | Ilomata International Journal of Tax & Accounting https://www.ilomata.org/index.php/ijtc Enhancing Tax Compliance in Indonesian Government Institutions Tax Obligations in Indonesian Government Institutions Tax Compliance in Indonesia The Contribution of Tax Obligations by Government Institutions Mitigation Strategies Inhibiting Tax Compliance in Government Institutions This research will elucidate the theoretical framework, which can be outlined as follows: 2. Tax Obligations in Indonesian Government Institutions Tax obligations within Indonesian government institutions encompass a set of crucial financial responsibilities that must be fulfilled by these government entities to support governmental functions and contribute to the country's development (Kraemer & Lehtimäki, 2023). Here is a summary of the provisions related to tax obligations within Indonesian government institutions: 1) The Law Number 6 of 1983 concerning General Provisions and Taxation Procedures as well as Law Number 7 of 2021 concerning Tax Regulation Harmonization regulate several crucial aspects related to the taxation system in Indonesia. Article 1 number 2 of these laws defines Taxpayer as including individuals or entities, including tax payers, tax with holders, and tax collectors, who have rights and obligations in accordance with tax regulations. In this context, Taxpayers play a vital role in the taxation process. 2) Article 4 stipulates that Taxpayers must correctly, completely, clearly, and sign the Notification Letter. This underscores the importance of accurate completion and submission of tax documents to ensure proper tax compliance. 3) Article 3 paragraph (3c) grants the Minister of Finance the authority to set the deadlines and procedures for reporting, withholding, and collecting taxes by government treasurers and certain entities. This reflects efforts to ensure that tax reporting and collection are conducted regularly and in accordance with the rules. https://www.ilomata.org/index.php/ijtc Enhancing Tax Compliance in Indonesian Government Institutions: Identifying and Mitigating Inhibiting Factors Silalahi 169 | Ilomata International Journal of Tax & Accounting https://www.ilomata.org/index.php/ijtc 4) In the context of administrative sanctions, Article 7 paragraph (1) imposes fines if the Notification Letter is not submitted within the specified timeframe or extended deadline. These fines vary depending on the type of Notification Letter and serve as a means to encourage tax compliance. 5) Article 12 paragraphs (1), (2), and (3) explain the obligation of Taxpayers to pay the owed taxes in accordance with tax regulations, without having to wait for a tax assessment letter. However, if there is a discrepancy between the amount of tax owed according to the Notification Letter and the actual situation, the Director General of Taxation has the authority to determine the correct amount of tax owed. 6) According to Article 9, paragraph (1), the Minister of Finance has the authority to determine the due date for the payment and deposit of outstanding taxes for a specific Tax Period. This deadline is no later than 15 (fifteen) days after the tax should have been paid or after the end of the respective Tax Period. 7) Article 9, paragraph (2a), explains that if the payment or deposit of taxes is made after the predetermined due date, the party involved will incur an administrative penalty in the form of interest. The interest rate per month is determined by the Minister of Finance and is calculated from the due date of payment until the actual payment date. This penalty can be imposed for a maximum period of 24 (twenty-four) months, with any portion of a month counted as a full month. 8) Article 10, paragraph (1), stipulates that taxpayers are obligated to pay or deposit the outstanding taxes using a Tax Payment Letter to the state treasury through the designated payment location as specified by the Ministry of Finance. 9) The Minister of Finance Regulation Number PMK-231/PMK.03/2019 concerning the Procedures for Registration and Removal of Taxpayer Identification Numbers, Confirmation and Revocation of Confirmation of Taxable Entrepreneurs, as well as the Withholding and/or Collection, Deposit, and Reporting of Taxes for Government Institutions, and PMK Number PMK-59/PMK.03/2022 stipulate several key aspects regarding tax-related procedures for Government Institutions, Article 23 paragraph (1) mandates that both Central and Regional Government Institutions are required to remit Income Tax (PPh) and Value Added Tax (PPN) or Value Added Tax and Luxury Goods Sales Tax (PPnBM) that have been withheld and/or collected within a specified period following the payment, either through the Cash Account mechanism in accordance with tax regulations or on the same day as the payment through the Direct mechanism as per tax regulations. 10) Article 25 paragraph (1) requires Government Institutions to report the withholding and/or collection of taxes carried out during a tax period to the Tax Office where the Government Institution is registered. 11) As detailed in Article 25 paragraph (2), this reporting should be done using the Periodic Notice of PPh Article 21 and/or PPh Article 26 for the withholding of PPh from individual taxpayers, or by utilizing a unified Periodic Notice for Government Institutions, covering the withholding and/or collection of PPh and PPN related to government expenditures. 12) Lastly, Article 25 paragraph (3) specifies that the reporting of the Periodic Notice, as mentioned in (2) a) and b), must be completed within a maximum of 20 (twenty) days after the end of the tax period. https://www.ilomata.org/index.php/ijtc Enhancing Tax Compliance in Indonesian Government Institutions: Identifying and Mitigating Inhibiting Factors Silalahi 170 | Ilomata International Journal of Tax & Accounting https://www.ilomata.org/index.php/ijtc Based on the aforementioned provisions, we hereby provide a summary of the deposit and reporting regulations for Government Institutions: Types of Taxes Types of Tax Forms Penalty for Late Submission of Periodic Tax Returns Withholding and Remittance Date Penalty for Late Payment Reportin g Deadline Cash Disburseme nt Mechanism Direct Payment Mechanis m Income Tax Article 21 Monthly Income Tax Return Article 21 IDR100.000 Within 7 (seven) days from the date of payment On the same day as the payment is made Administrativ e sanctions in the form of interest at the monthly interest rate determined by the Minister of Finance, calculated from the due date of payment until the payment date Within a maximu m of 20 days after the end of the Tax Period Income Tax Article 22 Unified Governm ent Institution Monthly Tax Return IDR100.000 Income Tax Article 23 IDR100.000 Income Tax Article 4 (2) IDR100.000 Income Tax Article 15 IDR100.000 VAT IDR500.000 https://www.ilomata.org/index.php/ijtc Enhancing Tax Compliance in Indonesian Government Institutions: Identifying and Mitigating Inhibiting Factors Silalahi 171 | Ilomata International Journal of Tax & Accounting https://www.ilomata.org/index.php/ijtc 3. Tax Compliance in Indonesia Tax compliance in Indonesia refers to the degree to which individuals and businesses in the country adhere to tax laws and regulations by accurately reporting their income, expenses, and financial activities and paying the required taxes in a timely manner (Firmansyah & Wijaya, 2022). It is a critical aspect of the country's tax system and plays a vital role in generating government revenue, supporting public services and infrastructure, and ensuring economic stability. In mid-January 2023, the Director General of Taxation at the Ministry of Finance, Suryo Utomo, announced that the compliance rate of the public or taxpayers in reporting Annual Tax Returns (SPT) and paying taxes throughout 2022 had reached 83.2%. Although this figure decreased compared to the 84.07% achieved in 2021, it still exceeded the set target of 80% (Rosadi, 2015). The target for annual SPT in 2022 was set at 19 million taxpayers, consisting of 1.65 million corporate taxpayers and 17.35 million individual taxpayers (Direktorat Jenderal Pajak, 2022). With a compliance rate of 83.2%, this means that approximately 15.8 million tax returns were filed in 2022. The compliance ratio is calculated by comparing the number of Annual Income Tax (PPh) returns received in a specific tax year with the number of registered taxpayers required to submit SPT at the beginning of the year. Tax compliance is of utmost importance in Indonesia for various compelling reasons. Firstly, it serves as a primary source of revenue for the government, funding an array of critical public services, development projects, and essential social welfare programs (Iswahyudi, 2021). This https://www.ilomata.org/index.php/ijtc Enhancing Tax Compliance in Indonesian Government Institutions: Identifying and Mitigating Inhibiting Factors Silalahi 172 | Ilomata International Journal of Tax & Accounting https://www.ilomata.org/index.php/ijtc financial inflow is indispensable to maintain the government's fiscal health, ensuring that it can meet its financial commitments, service debts, and effectively manage budget deficits, thereby contributing to fiscal stability (Diamond & Saez, 2011). Furthermore, robust tax compliance plays a pivotal role in fostering a conducive business environment, which is essential for economic growth. When individuals and businesses have confidence that tax laws are administered fairly and transparently, it encourages investment, stimulates economic expansion, and promotes overall prosperity (Irawan, 2019; Republik Indonesia. 2021. Peraturan Menteri Keuangan Republik Indonesia Nomor 59/PMK.03/2022 Tentang Perubahan Atas Peraturan Menteri Keuangan Nomor 231/PMK.03/2019 Tentang Tata Cara Pendaftaran Dan Penghapusan Nomor Pokok Wajib Pajak, Pengukuhan Dan Pencabutan Pengukuhan Pengusaha Kena Pajak, Serta Pemotongan Dan/Atau Pemungutan, Penyetoran. Dan Pelaporan Pajak Bagi Instansi Pemerintah., n.d.). Additionally, taxation can be leveraged as a tool for wealth redistribution, aiming to reduce income inequality by collecting a larger share of revenue from those with higher incomes. This equitable distribution of the tax burden is a crucial aspect of social and economic justice (Puspitasari, 2017). Moreover, tax revenue is the lifeblood of public services, encompassing vital areas such as healthcare, education, infrastructure development, and social safety nets (Nursalam, 2017). These services collectively enhance the well-being and quality of life for Indonesian citizens, underlining the significance of tax compliance in sustaining them (Adi, 2020). Lastly, in an increasingly interconnected global economy, adhering to international tax compliance standards is essential for Indonesia's international economic relations and maintaining a positive reputation on the world stage. In summary, tax compliance in Indonesia is not merely a legal obligation but a cornerstone of economic stability, social welfare, and international credibility (Mitchell, 2020). Efforts to enhance tax compliance in Indonesia include simplifying tax regulations, improving tax collection processes, raising awareness about tax obligations, and implementing penalties for non- compliance. These measures aim to ensure that individuals and businesses fulfill their tax responsibilities accurately and on time, ultimately benefiting the nation's development and welfare (Ngwaba & Azizi, 2020). 4. The Contribution of Tax Obligations by Government Institutions Government treasurers play a vital role in managing the finances of both the Central Government, responsible for the State Budget (APBN), and Local Government Treasurers, responsible for Regional Revenue and Expenditure Budgets (APBD). These treasurers are obligated to adhere to taxation laws. Taxes collected by Government Treasurers from both APBN and APBD expenditures constitute a crucial component of strategic tax revenue supporting national development. https://www.ilomata.org/index.php/ijtc Enhancing Tax Compliance in Indonesian Government Institutions: Identifying and Mitigating Inhibiting Factors Silalahi 173 | Ilomata International Journal of Tax & Accounting https://www.ilomata.org/index.php/ijtc To drive an increase in tax realization from government expenditures and enhance tax compliance among Government Treasurers, the Ministry of Finance issued Regulation of the Minister of Finance of the Republic of Indonesia Number 231/PMK.03/2019 concerning Procedures for Registration and Cancellation of Taxpayer Identification Numbers (NPWP), Confirmation and Revocation of Taxable Entrepreneurs (PKP), as well as Tax Deduction and/or Collection, Deposit, and Tax Reporting for Government Institutions. This regulation came into effect on May 1, 2022. The Minister of Finance's regulation also includes guidelines on tax deduction and/or collection by government institutions related to government expenditures and revenue, along with procedures for tax deposit and reporting by government institutions (Republik Indonesia. 2021. Peraturan Menteri Keuangan Republik Indonesia Nomor 59/PMK.03/2022 Tentang Perubahan Atas Peraturan Menteri Keuangan Nomor 231/PMK.03/2019 Tentang Tata Cara Pendaftaran Dan Penghapusan Nomor Pokok Wajib Pajak, Pengukuhan Dan Pencabutan Pengukuhan Pengusaha Kena Pajak, Serta Pemotongan Dan/Atau Pemungutan, Penyetoran. Dan Pelaporan Pajak Bagi Instansi Pemerintah., n.d.). The implementation of this regulation has streamlined the administration of Taxpayer Identification Numbers (NPWP) managed by Government Treasurers, limiting opportunities for Government Treasurers to evade tax obligations. Furthermore, increasing tax revenue originating from Government Treasurers can also be achieved by improving their tax compliance. According to Harjowiryono (2019), the tax compliance of Government Treasurers is influenced by four main factors: knowledge of taxation, attitudes towards tax obligations, the quality of tax services, and the ease of using tax applications (Suranta, 2018). If these factors continue to be enhanced and receive attention from the Directorate General of Taxes (DJP) and other relevant parties, it will promote increased tax compliance among Government Treasurers in fulfilling their tax obligations (Lee, 2019). In an ideal scenario, the process of tax collection from Government Treasurers, who hold prominent roles as public servants, should ideally be executed with ease, resulting in maximum outcomes. However, practical implementation often presents a range of challenges that impede the realization of optimal tax revenues from Government Treasurers. Examining tax revenue data spanning the years 2021 to 2023, we can observe the following regarding the realization of tax revenue in APBN report: Revenue Sources - Finance Realized State Revenue (Billion Rupiah) 2021 2022 2023 (Outlook) I. Revenue 2,006,334 2,435,867 2,443,183 Tax Revenue 1,547,841 1,924,938 2,016,924 Domestic Taxes 1,474,146 1,832,328 1,960,583 Income Tax 696,677 895,101 935,069 Value Added Tax and Luxury Goods Sales Tax 551,901 680,741 740,054 Land and Building Tax 18,925 20,904 31,311 https://www.ilomata.org/index.php/ijtc Enhancing Tax Compliance in Indonesian Government Institutions: Identifying and Mitigating Inhibiting Factors Silalahi 174 | Ilomata International Journal of Tax & Accounting https://www.ilomata.org/index.php/ijtc Acquisition of Rights to Land and Building Tax - - - Excise Tax 195,518 224,2 245,45 Other Taxes 11,126 11,381 8,7 International Trade Taxes 73,695 92,61 56,341 Import Duties 39,123 43,7 47,529 Export Tax 34,573 48,91 9,013 Non-Tax Revenue 458,493 510,93 426,259 Natural Resource Revenue 149,489 218,493 188,745 Revenue from Separated State Wealth 30,497 40,405 44,068 Other Non-Tax Revenue 152,504 149,013 110,43 Revenue from Public Service Agencies 126,003 103,018 83,016 II. Grants 5,013 1,011 409 Total 2,011,347 2,436,878 2,443,592 5. Mitigation Strategies Inhibiting Tax Compliance in Government Institutions The factors influencing tax revenue collection by Government Treasurers, both at the central and regional levels, are highly relevant to current taxation issues in Indonesia (Anderson, 2023). Some recent issues that can be linked to these factors include: 1) Tax Compliance Improvement: In an effort to address budget deficits and fund various national development programs, the Indonesian government is increasingly focused on enhancing tax revenue collection. Hence, issues related to tax compliance among Government Treasurers become crucial (Satyadini et al., n.d.). Factors such as a poor understanding of tax regulations and challenges in using tax-related applications can impede the government's efforts to boost tax revenue. 2) Technology Adoption in Taxation: The Indonesian government continues to develop information technology-based tax systems. Issues related to the information technology proficiency of Government Treasurers necessitate training and skill development in effectively managing tax applications. This relates to the modernization of taxation and the drive for efficiency in tax collection (Saragih et al., 2022). 3) Integration of Central and Regional Tax Systems: Issues regarding the integration of tax systems between the central and regional governments are also critical. Poor integration can lead to potential tax revenue losses, especially in regional budget expenditure (Rahman, 2020). 4) Education and Training for Government Treasurers: This issue pertains to improving the quality and competence of Government Treasurers regarding tax regulations (Eichner & Pethig, 2018). Enhanced training and relevant educational programs can help improve their understanding of ever-evolving tax regulations. By identifying and addressing these factors, the government can enhance tax collection efficiency, reduce potential tax revenue losses, and support sustainable national development. Here is a table https://www.ilomata.org/index.php/ijtc Enhancing Tax Compliance in Indonesian Government Institutions: Identifying and Mitigating Inhibiting Factors Silalahi 175 | Ilomata International Journal of Tax & Accounting https://www.ilomata.org/index.php/ijtc depicting the cause-and-effect relationships between factors influencing tax compliance in government institutions and the corresponding mitigation strategies: Factors Influencing Tax Compliance Cause-and-Effect Relationship Mitigation Strategies Knowledge of Government Treasurers Inadequate knowledge may reduce tax compliance. Tax Education and Training to enhance tax understanding. Application Systems Difficulty in using tax applications can lead to errors. Efficient Technology Use and training in application usage. Supervision and Auditing Stringent supervision and auditing can encourage compliance. Regular Supervision and Auditing. Penalties Strict penalties can serve as additional incentives. Appropriate Penalties for tax violations. Technology Use of information technology can simplify tax reporting. Leveraging information technology for more efficient tax processes. Transparency and Accountability A culture of transparency can enhance tax obligation fulfillment. Cultivating a culture of transparency and accountability within the institution. Management Support Management support can prioritize tax compliance. Engaging active support from top-level management. Tax Consultation Tax consultation can prevent errors or tax mismatches. Providing access to consult with tax authorities. This table illustrates how each factor affecting tax compliance in government institutions is linked to compliance levels and the appropriate mitigation strategies for each factor. CONCLUSION In order to enhance tax compliance in Indonesian government institutions, this study has identified several inhibiting factors and formulated appropriate mitigation strategies. These factors include a lack of understanding of tax regulations, difficulties in using tax applications, and challenges related to information technology proficiency (Crocker et al., 2022). To address these barriers, mitigation https://www.ilomata.org/index.php/ijtc Enhancing Tax Compliance in Indonesian Government Institutions: Identifying and Mitigating Inhibiting Factors Silalahi 176 | Ilomata International Journal of Tax & Accounting https://www.ilomata.org/index.php/ijtc efforts such as tax education and training, efficient use of information technology, strict supervision and auditing, appropriate penalties for tax violations, increased transparency and accountability, top-level management support, and access to tax consultation are needed. In conclusion, tax compliance in Indonesian government institutions is of paramount importance for the country's economic stability, development, and overall welfare. This article has highlighted several key points: 1) Tax compliance is crucial for generating government revenue, supporting public services, and ensuring fiscal stability. 2) Enhancing tax compliance among government treasurers is essential, as they play a pivotal role in managing the finances of both the Central Government and Local Governments. 3) Recent efforts to improve tax compliance include streamlining tax regulations, improving tax collection processes, raising awareness about tax obligations, and implementing penalties for non-compliance. 4) Factors influencing tax compliance among government treasurers include knowledge gaps, challenges in using tax applications, issues related to information technology proficiency, integration of tax systems, and the need for education and training. 5) Mitigation strategies for these factors include tax education and training, efficient technology use, regular supervision and auditing, appropriate penalties, leveraging information technology, fostering transparency and accountability, engaging top-level management support, and providing access to tax consultation. Addressing the inhibiting factors of tax compliance in government institutions is essential to maximize tax revenue collection, support sustainable economic development, and ensure the efficient allocation of resources in Indonesia. Implementing these mitigation strategies can contribute to achieving these goals and promoting a culture of tax compliance within government entities (Herawaty, 2021). Improving tax compliance in Indonesian government institutions is a crucial step in supporting economic stability, national development, and the general welfare. By identifying inhibiting factors and implementing suitable mitigation strategies, it is hoped that government institutions can be more effective in fulfilling their tax obligations (Rosadi, 2015). These efforts will have a positive impact on tax revenue, sustainable economic development, and efficient resource allocation in Indonesia. Thus, the role of tax compliance in government institutions is not only a legal obligation but also a foundation for economic stability, social welfare, and international credibility. Regarding the research titled "Enhancing Tax Compliance in Indonesian Government Institutions: Identifying and Mitigating Inhibiting Factors," here are the answers to the three research questions posed: 1) Research Question 1: What are the primary factors inhibiting tax compliance in Indonesian government institutions, and how do these factors affect the government's ability to support sustainable economic growth and reduce poverty levels? https://www.ilomata.org/index.php/ijtc Enhancing Tax Compliance in Indonesian Government Institutions: Identifying and Mitigating Inhibiting Factors Silalahi 177 | Ilomata International Journal of Tax & Accounting https://www.ilomata.org/index.php/ijtc The primary factors inhibiting tax compliance in Indonesian government institutions include a lack of understanding of tax regulations, difficulties in using tax applications, corrupt practices, and challenges related to information technology proficiency (Hadipryanto et al., 2023). The impact of these factors is a reduction in state revenue, which can directly affect the government's capacity to support sustainable economic growth and reduce poverty levels. Additionally, the decrease in revenue can hinder the government's ability to provide essential public services to address poverty-related issues. 2) Research Question 2: To what extent do the impacts of these factors inhibiting tax compliance affect significant state revenue, effective income inequality management, and the achievement of other national development goals already attained by the Indonesian government? The impacts of the factors inhibiting tax compliance have a significant effect on state revenue. Non-compliance with tax obligations can lead to a substantial loss of revenue, directly impacting the government's ability to fund various national development programs and effectively manage income inequality (Rosadi, 2015). The reduction in revenue can also impede the achievement of national development goals that the Indonesian government has already attained, including improving social welfare, reducing poverty, and managing income inequality (Indradi, 2023). 3) Research Question 3: What effective mitigation strategies can be proposed to address the factors hindering tax compliance within government institutions, with the aim of enhancing the government's role in supporting sustainable development, including improving social welfare, reducing poverty, and managing income inequality? To address the factors hindering tax compliance within government institutions, several effective mitigation strategies can be proposed: a) Tax Education and Training: Providing tax education and training to government employees to enhance their understanding of tax regulations. b) Efficient Technology Use: Encouraging the efficient use of information technology in tax administration to streamline tax reporting and payment processes. c) Stringent Supervision and Auditing: Conducting rigorous tax supervision and auditing to ensure compliance and penalize tax violations. d) Appropriate Penalties: Imposing suitable and effective penalties for tax violations to incentivize compliance. e) Transparency and Accountability: Increasing transparency in the tax system and ensuring accountability in the use of tax funds. f) Top-Level Management Support: Garnering full support from top-level management in efforts to improve tax compliance. g) Access to Tax Consultation: Providing easy access to tax consultation services for taxpayers. https://www.ilomata.org/index.php/ijtc Enhancing Tax Compliance in Indonesian Government Institutions: Identifying and Mitigating Inhibiting Factors Silalahi 178 | Ilomata International Journal of Tax & Accounting https://www.ilomata.org/index.php/ijtc By implementing these strategies, it is anticipated that the government can enhance tax compliance within its institutions, thereby supporting sustainable development, improving social welfare, reducing poverty, and effectively managing income inequality in Indonesia.(Artz, 2010) REFERENCE Adi, A. , & N. 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