Title: Could the next Indonesian income tax law adopt to the concept of income under IFRS?

Authors: Prianto Budi; Ning Rahayu

Addresses: Department of Fiscal Administration, Universitas Indonesia, Depok, 16424, Indonesia ' Department of Fiscal Administration, Universitas Indonesia, Depok, 16424, Indonesia

Abstract: This study has two purposes. The first is to explore the implementation of income concepts under current income tax law (UU PPh) before and after the convergence of International Financial Reporting Standards (IFRS) in Indonesia. The second is to explore whether the new UU PPh could adopt the notion of income under IFRS. By using a qualitative approach, this study concluded that before and after IFRS convergence, the income definition under current UU PPh has never changed since its first 1983 enactment. Such condition has resulted in some income tax issues based on the ability-to-pay principle and realisation doctrine. The main problem relates to the realisation principle as part of the historical cost accounting system, whereas accounting income refers to the mark-to-market, ignoring realisation rules. The second conclusion is that the income concept under the next UU PPh can partially apply the accounting income concept because it still needs the realisation principle.

Keywords: the concept of income; ability-to-pay principle; realisation doctrine; historical cost accounting; HCA; fair value accounting; FVA.

DOI: 10.1504/IJEPEE.2021.113581

International Journal of Economic Policy in Emerging Economies, 2021 Vol.14 No.2, pp.151 - 173

Received: 17 Mar 2020
Accepted: 08 Apr 2020

Published online: 28 Jan 2021 *

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