Implications of the law on harmonization of tax regulations (UU HPP) on tax accounting practices in Indonesia

Abstract

The enactment of Law No. 7 of 2021 on the Harmonization of Tax Regulations (UU HPP) represents a significant milestone in Indonesia’s tax reform agenda, aiming to improve fairness, compliance, and administrative efficiency in the national tax system. This qualitative descriptive study investigates the implications of the UU HPP on corporate tax accounting practices. Data were obtained through in-depth interviews with tax professionals, corporate accountants, and consultants. Thematic analysis revealed four major findings: (1) the lack of technical clarity in recognizing fringe benefits (natura) as taxable income, (2) increasing discrepancies between commercial and fiscal accounting practices, (3) challenges in adapting to digital reporting obligations, particularly among SMEs, and (4) limited dissemination of the policy, resulting in uneven levels of professional readiness. The study concludes that while the UU HPP contributes to modernization efforts, its implementation remains constrained by insufficient technical support and weak alignment with prevailing accounting standards. Recommendations are proposed to enhance regulatory clarity, professional capacity building, and integration between tax rules and financial reporting systems. From a managerial standpoint, the findings suggest the need for proactive adaptation of internal accounting systems and alignment of tax compliance functions with organizational strategy.