READINESS OF COMPANIES TO IMPLEMENT EFFECTIVE TAX MANAGEMENT PRACTICES: A CASE STUDY IN INDONESIA

This study aims to evaluate and comprehend the gap between the tax management quality of companies in Indonesia and the effective practices of tax management. A systematic literature review was initially conducted to identify the relevant Critical Success Factors (CSFs) essential for measuring tax management quality. A comprehensive survey involving numerous businesses highlights the variability in commitment to tax strategies and the challenges companies face in integrating effective tax management principles. Key findings emphasize the importance of leadership commitment, employee training, and proactive risk management in enhancing tax practices. Despite some alignment with best practices, many companies struggle with critical areas such as employee development and the implementation of a robust tax culture. The study advocates for a holistic approach, urging companies to embed tax strategies into their overall business operations and to foster a culture of continuous improvement. Additionally, it calls on policymakers to provide regulatory support and incentives that encourage compliance and the adoption of innovative technologies. Overall, this research underscores the urgent need for Indonesian companies to elevate their tax management practices to improve compliance and enhance overall business performance.


INTRODUCTION
The business landscape has become increasingly dynamic, intensifying competition for advantageous market positions.Consequently, companies are exploring innovative methods to address various challenges within both their internal and external business environments.This situation compels companies to adopt innovative managerial practices such as Lean philosophy to minimize or eliminate defects, Six Sigma for precise action measurements, and ISO 9001 standards to ensure comprehensive quality management (Izzalqurny et al., 2019).Beyond these methods, effective tax management has also emerged as a prominent management philosophy.This model is grounded in sustainable principles that prioritize the prevention of problems through continuous improvement in processes and product quality, rather than merely addressing issues postoccurrence.
Although the principles and practices of effective tax management are advantageous and adaptable to various environments and cultures, some companies struggle to integrate these practices seamlessly.To conform to these practices and principles, companies must demonstrate commitment, organization, and adherence to the specific standards recommended by effective tax management.This study aims to investigate how companies in Indonesia manage their tax responsibilities and to assess their tax management quality by comparing it to the practices and principles of effective tax management.
To conduct this assessment and gauge the managerial quality of companies, two research questions and a hypothesis were formulated and tested based on the principles and practices of effective tax management.The research questions guiding this study are: RQ1: How well does the tax management of companies align with effective tax management practices?RQ2: In which areas do companies exhibit more or less focus regarding tax management?
The hypothesis proposed is: H0: The quality of tax management in companies, across all dimensions, does not meet the standards required by the principles and practices of effective tax management.
The discussions of tax management principles and practices typically reference CSFs that can influence the quality of management in companies.Therefore, to measure the quality of tax management, this study first identified the CSFs for effective tax management implementation and then applied appropriate statistical methods to test the hypothesis and answer the research questions.

THEORETICAL FRAMEWORK
In this section, the historical development and significance of Critical Success Factors (CSFs) for effective tax management practices are discussed, focusing on their distinctive features across various sectors.

The Model of Effective Tax Management & CSFs for Tax Management
Effective tax management encompasses a combination of management concepts, theoretical frameworks, and innovative practices designed to support organizational tax compliance and optimization for sustainable performance (Stripe et al., 2022).This approach emphasizes a customer-centric orientation, aiming to meet and exceed customer expectations through a deep understanding of their current and future needs (Chapman et al., 2009).As highlighted by numerous researchers (Reinhardt, 2023), since the 1980s, effective tax management has been recognized as a pivotal management strategy that enables organizations to enhance their managerial capabilities, improve performance, and achieve excellence.The conceptual foundations of this approach can be traced back to the work of Walter Shewhart in statistical process control at Bell Laboratories in the 1920s (Chasiotis et al., 2023).The evolution of effective tax management principles has been significantly influenced by quality pioneers such as W. Edwards Deming, Joseph M. Juran, and Philip B. Crosby, who have all contributed to its development (Chatzistamoulou & Koundouri, 2024).
Effective tax management has the potential to improve business outcomes, increase customer satisfaction, foster teamwork, and enhance employee management within organizations (Haupt & Whiteman, 2004).To harness these benefits, organizations must focus on critical tasks, known as Critical Success Factors (CSFs), when implementing effective tax management strategies (Yunita et al., 2018).Therefore, identifying and measuring these CSFs is crucial for organizations (Silalahi, 2024).Extensive literature reviews have identified numerous CSFs applicable across various sectors.
For instance, Sinha, Garg, & Dhall (2016) identified eight CSFs that impact general business performance: Customer Focus, Leadership, Involvement of People, Process Approach, System Approach to Management, Continual Improvement, Factual Approach to Decision Making, and Mutually Beneficial Supplier Relationships.In Malaysia, the research found that leadership, strategic planning, customer focus, information and analysis, human resource management, process management, and supplier management are critical for business performance (Ismail et al., 2022).The CSFs such as Leadership, Strategic Planning, Information Management, Human Resource Focus, Customer and Market Focus, Supplier Focus, Process Management, Impact on Society, Human Resource Satisfaction, Customer Satisfaction, Supplier Satisfaction, and Company-Specific Business Results as vital for quality management in Indian businesses.
In the context of Greek businesses, common CSFs during crisis conditions include Top Management Support, Elimination of Employee Fear, Vision Sharing, Empowerment, Employee

Tax Strategy Focus
Research on integrating tax strategy into overall business strategy and its impact Globally, companies are pivotal in driving economic growth, job creation, and innovation.They vary in size and structure, from large multinational corporations to small local businesses.The categorization of companies often depends on their number of employees, revenue, or other operational metrics.For instance, in Europe, companies with fewer than 250 employees are classified as small and medium-sized enterprises (SMEs).In the United States, small enterprises have up to 50 employees, while larger enterprises can have up to 250 employees.Japan and South Korea define SMEs as those with fewer than 500 employees.
Regardless of size, companies play a crucial role in market evolution, contributing significantly to sustainable development in various sectors such as trading, production, and services.They drive economic growth by attracting investments, enhancing productivity, and creating jobs.According to recent data, companies represent a substantial portion of the business landscape, with SMEs alone making up 99% of businesses in the European Union and contributing to approximately 85% of new job creation over the past five years (Santamouris, 2020).
Companies can be categorized into traditional and modern entities.Traditional companies often lack long-term strategies, operate in niche markets, and rely on inherited production methods.In contrast, modern companies embrace the latest technologies, continuously seek new markets, and strive for competitiveness and operational efficiency.The behaviors and capabilities of companies are influenced by globalization, competition, and market changes (Herman & Sufiyati, 2023).To remain competitive, companies must innovate in product development, processes, and management systems.Successful performance is reflected in industrial revenue growth, job creation, export increases, and overall productivity (Gutiérrez-Ponce & Wibowo, 2023).

Companies in Indonesia
In Indonesia, companies are a vital sector of the economy, contributing significantly to employment and overall economic development.This sector's impact includes job creation, fostering healthy competition, and adopting modern technologies.Companies in Indonesia are categorized based on their size: micro-enterprises (0-9 employees), small enterprises (10-49 employees), and medium enterprises (50-250 employees) (Reinhardt, 2023).
Recent statistics from the Indonesian Business Registration Agency indicate that companies constitute a significant portion of the labor market.Despite the large number of registered companies, there is a notable discrepancy between registered and active enterprises, suggesting challenges in maintaining business operations.Many companies face managerial difficulties, which impact their competitiveness compared to developed countries (Christian Hamdany Barus et al., 2024).Adapting to business needs through professional methods and social integration remains a challenge for many companies in Indonesia.Nonetheless, ensuring the sustainability of these companies is crucial for the country's economic development.Adopting recognized standards is essential for economic growth and stability (Silalahi, 2023b).

METHODS
As depicted in Figure 1 below, the research was conducted in various phases, applying appropriate methods to achieve the study's objectives.

Fig.1: Research Methodology Flow
Source: Author Systematic literature review Following Thomé et al.A systematic six-step process was employed to select and retrieve relevant papers to identify critical success factors (CSFs).Only reputable digital platforms like Emerald, Elsevier, Taylor & Francis, Springer, and Wiley were used.Keywords such as "tax management" and "company practices" were utilized to locate pertinent articles.Google Scholar served as the primary search engine.Only peer-reviewed articles published between 2017 and 2023 were considered.The process involved evaluating paper titles, reading abstracts, reviewing entire papers, and extracting necessary information.This approach identified 11 relevant articles highlighting 21 CSFs applicable to tax management practices across various countries, detailed in Table 1.

Validation of CSFs for Tax Management Implementation
The Delphi technique was used to validate the identified CSFs.This method is effective in reaching consensus in fields with incomplete knowledge (Silalahi, 2023a).Sixteen business administration experts participated, assessing the importance of each CSF using a Likert scale (1 = not at all, 2 = low importance, 3 = medium importance, 4 = very important, 5 = Ideal).Only CSFs with a Cronbach's Alpha above 0.70 were retained for further study.Cronbach's Alpha measures the reliability of a set of items (Silalahi & Budi Kurnia, 2023).For each validated CSF, three indicators were developed and used in the subsequent survey with companies, as shown in Table 2.

Conducting the survey
A field survey was conducted to collect data, which was then analyzed statistically.Data collection involved 36 specific questions related to tax management practices and CSFs.This method is popular for its efficiency in handling large numbers of questions (Syahrini et al., 2023).The study used databases from the state business registration agency and the "Open Businesses" civil society project.A total of 370 businesses meeting the study criteria were contacted via email, Viber, WhatsApp, and mobile messages.The survey utilized a five-point Likert scale to assess managerial practices.Of the 370 distributed questionnaires, 76 were completed by companies across various sectors: services (48.7%), production (25%), service and production (25%), and sales (1.3%).The respondents included a mix of company sizes and ownership types, with a range of market penetration from local to global.Data collection occurred from August 20 to September 20, 2022.

Data analysis
Data were processed in three phases to test research hypotheses.First, frequent CSFs were filtered and selected using Excel.Second, descriptive statistics analysis was performed using SPSS to rank CSFs based on expert assessments (Table 2).Finally, indexed values were analyzed using the One Sample T Test to evaluate the readiness of companies to implement effective tax management practices.

RESULTS AND DISCUSSION
In this section, descriptive and statistical results are presented.Descriptive statistics, indexed results, one-sample statistics, and one-sample T Test analysis were performed to confirm or reject the raised hypotheses.Table 2: Descriptive statistics of CSFs -experts' evaluation Table 2 shows the means, maximum, minimum values, and standard deviation values.The ranking of CSFs in the table is done according to the highest value of the mean.Out of the 21 CSFs, only 12 have reached a mean value above 4, indicating "very effective."The CSF "Documentation and Record Keeping" is the last in the list of 12 CSFs validated for the needs of the study.Only CSFs with a mean above 4.00 were used for further research.Subsequently, the data analysis continued with sub-variables indexing.In this step, the sub-variables (mean values) for each indicator were merged into one unique variable.The indicators are used to perform specific measurements for the behavior of the enterprise related to the relevant problems.The construction of indicators is based on specific and relevant features with CSFs such as inputs, outputs, and results of enterprises.Table 3 3 shows the number of subjects that participated in the survey, averages, standard deviation, and std.error mean.It indicates that 76 subjects participated in the survey; the mean values indicate the level of tax management readiness in comparison with effective practices.The mean column indicates the average values, with the highest mean value in "Tax Strategy Alignment" at 3.963, while the lowest mean value is in "Employee Training" at 3.162.The mean values in Table 3 show that companies are inclined to perform better in tax strategy alignment, whereas they perform poorly in providing adequate employee training for tax management.This logic can be used to explain each of the CSFs listed in Table 3.
Afterward, the One Sample T Test analysis was performed to test the hypotheses presented initially.As seen in The results from the One-Sample T Test show that for all CSFs, the mean values are significantly lower than the test value of 5 (which represents full compliance with effective tax management practices).All p-values are less than 0.05, indicating that there is a significant difference between the observed mean values and the test value.This suggests that while companies in Indonesia are performing relatively well in certain areas of tax management, there is still substantial room for improvement across all the CSFs analyzed.

Discussion
In this section, we analyze and discuss the performance of various indicators related to Critical Success Factors (CSFs) to evaluate the readiness of Indonesian companies to implement effective tax management practices.Each indicator has been analyzed using SPSS, specifically the Custom Tables method, to calculate the performance percentage for each indicator.These percentages reveal the extent to which the managerial quality of companies aligns with best practices in tax management.Indonesian companies are beginning to recognize the importance of integration, but full integration remains low (12.90%).

Leadership & Management
16.30% of companies have leaders fully committed to tax management.(Andrejovska et al., 2024) highlighted the need for proactive leadership in tax risk management.
Leadership in Tax Management Theory.
Commitment in leadership has increased, supporting the theory that strong leadership reduces tax risks.

Continuous Improvement
14.30% of companies fully adopt innovative approaches for tax efficiency.(Johansson, 1986) found that innovative approaches enhance competitiveness.
Total Quality Management (TQM) Theory.
The pace of innovation remains slow, indicating a need for increased application of TQM principles in tax management.

Training & Education
Only 5.10% of companies fully allocate resources for tax training.(Brown, 2022)  The structural use of tax project management tools is increasing but still needs enhancement.

Analysis and Measurement
29.90% of companies use advanced tax analysis techniques.
(Davis, 2020) emphasized the importance of advanced analysis for better tax outcomes.

Advanced
Analysis in Tax Theory.
The use of advanced tax analysis is beginning to be applied, supporting theories on the importance of deeper and accurate analysis.

CONCLUSION
In today's rapidly evolving business environment, the implementation of quality management strategies is crucial for companies to remain competitive.This study aimed to assess the readiness of Indonesian companies to adopt effective tax management practices, highlighting the importance of strategic alignment, leadership commitment, continuous improvement, and comprehensive employee involvement.
The research identified 12 Critical Success Factors (CSFs) essential for the successful implementation of tax management practices.These CSFs include Tax Strategy Focus, Leadership & Management, Continuous Improvement, Training & Education, Teamwork, Human Resource Management, Information Management, Process Management, Employee Involvement, Tax Culture, Project Management, and Analysis and Measurement.The findings from the surveyed companies revealed significant variability in the readiness and application of these factors.
From a practical perspective, the study offers several insights for both companies and policymakers: 1. Strategic Alignment: Companies need to integrate tax strategy into their overall business strategy.This includes regular tax planning sessions and staying updated with tax regulation changes.Firms that align their tax strategy with business goals tend to perform better in tax compliance and efficiency.2. Leadership Commitment: Effective tax management requires strong leadership that ensures adequate resources and proactive risk management.Leaders must be engaged and committed to fostering a culture that prioritizes tax management.3. Continuous Improvement: Adopting innovative approaches and leveraging technology for tax compliance is crucial.Companies should invest in ongoing improvement initiatives to enhance their tax management processes.
2. Incentives for Compliance: Introduce incentives for companies that demonstrate strong tax management practices.This could include tax credits, reduced penalties, or public recognition for compliance excellence.3. Educational Programs: Support educational initiatives that enhance the tax knowledge and skills of business leaders and employees.Partner with industry associations to develop and deliver targeted training programs.4. Technology Adoption: Encourage the adoption of technology for tax compliance through grants or subsidies.Providing access to advanced tax management software can help companies improve their compliance efforts. 5. Collaboration with Industry: Foster collaboration between the government and the private sector to address tax management challenges.Regular dialogues and feedback mechanisms can help identify and resolve issues effectively.
The research highlights the need for Indonesian companies to enhance their readiness in implementing effective tax management practices.By focusing on the identified CSFs and adopting a strategic, well-resourced approach, companies can improve their tax compliance and overall business performance.Policymakers, on the other hand, can support these efforts through regulatory clarity, incentives, educational programs, and technology support.Together, these initiatives can create a more robust tax management framework that benefits both businesses and the economy as a whole.

Table 1 : Relevant Research Segments in Tax Management Practices Defining Companies and Their Specific Features
Table2shows the descriptive results and CSF ranking that emerged after the experts' evaluation.

Table 3 :
shows the indexed CSFs values.Indexed value for each CSF / One-Sample Statistics Table

Table 4 ,
for each CSF, values indicate whether the raised hypotheses are confirmed or rejected.The averages of CSFs are tested with a value of 5, which assumes that companies operate fully in accordance with effective tax management practices.

Table 4 :
One-Sample StatisticsIn Table4, general information is provided regarding the number of companies included in the research, the mean values, standard deviation, and std.error mean.These values were subjected to One Sample T Test analysis and are presented in Table5.

Table 5 :
One-Sample Test Analysis

Table 6 :
Table6presents all 12 CSFs and 36 indicators surveyed across 77 different businesses, reflecting managers' or business owners' assessments of their tax management readiness.The responses were measured using a Likert scale, ranging from "not at all" to "completely."Averagevaluesforeach CSF were derived and indexed for discussion, with the CSFs and indicators listed according to validation results from tax management experts.Performance of IndicatorsFrom Table6, we can see the distribution of values expressed as percentages.To address the research questions, the values are presented in an indexed form and the CSFs related to tax management readiness are discussed.

Table 7 :
Comparative Analysis of CSFs in Tax Management Readiness