Taxation in the Digital Age: Innovations and Challenges

Abstract

ThThe digital economy, with its non-physical, cross-border and data-driven characteristics, fundamentally challenges Indonesia's conventional taxation system. The country faces significant challenges related to jurisdiction and Permanent Establishment (PE) issues, tax base erosion and profit shifting (BEPS), the complexity of new business models, and compliance and data collection constraints. In response, the Directorate General of Taxes (DGT) has proactively implemented various innovations, including progressive regulations (such as PMK PPN PMSE and crypto tax), service digitalisation (e-filing, Core Tax System), utilisation of big data and AI, and tax education. However, the implementation of these innovations is still hampered by low digital fiscal literacy among the public, limited human resources and infrastructure at the DJP, industry resistance, and international policy disharmony. Therefore, the success of taxation in Indonesia's digital era is highly dependent on dynamic regulatory adaptation, technological strengthening, increased human resource capacity, and cross-border cooperation to achieve a fair and sustainable tax system.