Root Causes of Secondary Adjustment Tax Disputes in Transfer Pricing: Analysis and Solutions for Indonesia

Hubaya Arif Auliya; Arifin Rosid

doi:10.24843/EJA.2025.v35.i02.p06

Hubaya Arif Auliya Faculty of Economics and Business, Universitas Indonesia, Indonesia
Arifin Rosid Faculty of Economics and Business, Universitas Indonesia, Indonesia

DOI: https://doi.org/10.24843/EJA.2025.v35.i02.p06

Abstract

Tax disputes related to secondary adjustments in transfer pricing at the Indonesian Tax Court have increased, despite a decline in cases filed by the Directorate General of Taxes between 2021 and 2023. This study analyzes the root causes of these disputes using Root Cause Analysis (RCA) and Fishbone Diagrams. Data includes 358 court rulings, literature reviews, and semi-structured interviews with eight stakeholders, including judges, tax auditors, tax objection officer, and tax consultants. Findings reveal that unclear definitions of disguised dividends—adopted as a consequence of secondary adjustments under Indonesian regulations—differing interpretations of Ministry of Finance Regulation No. 22/2020, limited tax auditor competence, and aggressive tax audit targets are key causes. The study recommends clarifying regulations, enhancing tax auditor training, and prioritizing quality over quantity in tax audits. These measures are expected to improve legal certainty, reduce disputes, and strengthen Indonesia’s tax administration system.

Keywords: Secondary Adjustment; Transfer Pricing; Tax Disputes; Indonesian Tax Court; Root Cause Analysis

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