Income Tax Reconstruction on Construction Services to Support Development in Indonesia

Abstract

Purpose: The rapid development of construction companies is still dominated by various illegal acts, including bribery, embezzlement, and fraud; this means that the correct tax income will not be reported to the tax office. It is necessary to produce a reconstruction of the income tax provisions on development-based construction services. Design/methodology/approach: This paper applied a normative juridical method with an evaluative and prescriptive thought. Findings: The applicable income tax regulations on Construction Services have not been able to overcome various illegal acts, such as fictitious sub-contractors, fictitious work units, replacement or deterioration of material quality, transfer of lump-sum costs to material costs, tender collusion, personal use of project equipment, and money laundering. Research limitations/implications: This paper would benefit from an in-depth study using a socio-legal approach. However, it can enrich subsequent empirical research. Originality/value: It is important and urgent to renew the income tax law in overcoming existing fraud on Construction Services, including the regulation of the Construction Industry Schemes obligations together with sanctions for each violation, revocation of final income tax on construction services, and the obligation to use the percentage-of-completion method in construction services whose project completion exceeds a financial year.