Page 2 - Working Paper (Asymmetric Information & Its Impact On Tax Compliance Cost In Indonesia)

DDTC Working Paper 0113 DDTC Working Paper 0113

Asymmetric Information and

Its Impact on Tax Compliance

Cost in Indonesia:

A Conceptual Approach

B. Bawono Kristiaji 1

A complexity of a tax system has a direct
relationship with the hidden cost of
taxation. The hidden cost of taxation is TABLE OF CONTENTS
considered as compliance cost. There is a
missing link between the relationship of
compliance cost and the complexity of a
tax system starts from the situation called 1. Introduction ............ 3
asymmetric information.
2. Theory of
Asymmetric information clarifies the asymmetric
behavior patterns of actors in a transaction information and
in the situation where there is an imbalance compliance cost ...... 3
of information that could potentially result
in a market failure. Through assuming a 3. Relationship
model where actors are interacting with of asymmetric
each other in a tax system, thereby could information and
be found the implication of compliance compliance cost ...... 4
cost in Indonesia.
4. The implications
In the context of economics of of compliance cost
development, the presence of compliance in Indonesia and
cost will trigger high cost economy of a proposed policy for
country and considered as a disincentive its solution .............. 8
to taxpayers in complying with the
tax system. Focusing on a conceptual
approach and its relationship with current
tax developments in Indonesia, this
study recommend several policies that
are considered to anticipate its negative
effects on the economy.

1 Partner, Research dan Training Services DANNY DARUSSALAM Tax
Center. The author gratefully acknowledges helpful comments from
Darussalam and Danny Septriadi, as well as valuable input during the
works from Yusuf W. Ngantung, Ganda Christian Tobing and Muhammad
Fahrial.

Disclaimer:

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or
entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate
as of the date received or that it will continue to be accurate in the future. The author’s views expressed in this Working Paper do not
necessarily reflect of the views of DANNY DARUSSLAM Tax Center. Working Papers describe research in progress by the authors and are
published to elicit comments and to further debate.