The Impact of Tax Service Digitalization on Tax Revenue: Evidence from the Indonesian Subnational Data

Abstract

Background: The implementation of digital tax administration in Indonesia, through digital service channels such as e-filing, e-registration, e-billing, e-invoice, and e-bupot, aims to increase tax compliance and optimize tax revenue collection. However, empirical research on the effects of these digital services on total tax revenue remains limited.
Purpose: The purpose of this study is to analyze the impact of digital tax service implementation on tax revenue and explain the differences in effectiveness between digital service channels at the regional level.
Design/methodology/approach: This study uses panel data from 21 provinces for the period 2017–2023 and applies a Two-Way Fixed Effects model to control for provincial and annual heterogeneity. The model robustness is then tested using the ARDL method, which separates short-term and long-term effects.
Findings/Results: E-bupot, e-registration, and e-billing services have positive, statistically significant effects on total tax revenue, while e-filing and e-invoice have no significant effect. Cross-province analysis shows a high degree of heterogeneity in the effect of digitalization, with higher performance in Java than outside Java.
Conclusion: The digital tax administration plays an important role in increasing national tax revenue, but effectiveness varies across channels and regions.
Originality/value (State of the art): This study is the first to evaluate five digital tax channels using TWFE and ARDL panel data and explains the variation in the effectiveness of tax digitalization across Indonesian regions.

Keywords: digital tax administration, electronic tax services, Indonesian fiscal administration, tax digitalization, tax revenue performance