Digitalization of tax administration and compliance of Islamic banks

Abstrak

The rapid transformation of global tax administration toward Tax Administration 3.0, highlighted in Indonesia by the implementation of the Core Tax Administration System (Coretax) during 2024–2026, presents critical structural challenges for Islamic banking. This study aims to systematically review, map, and synthesize current literature regarding the impact of digital tax administration on tax compliance, operational risks, and financial performance in Islamic banks. Applying the Systematic Literature Review (SLR) approach governed by the Preferred Reporting Items for Systematic Reviews and Meta-Analyses (PRISMA) 2020 protocol, a comprehensive search was conducted across Scopus, Web of Science, and DOAJ databases for publications between 2024 and 2026. Out of 214 initial records, 28 high-quality peer-reviewed articles were included for thematic synthesis. The findings reveal three dominant thematic clusters: (1) short-term compliance cost surges and long-term operational efficiency gains affecting Return on Assets (ROA) and BOPO ratios; (2) potential operational and technical alignment friction between automated digital tax algorithms (e.g., Coretax) and complex Sharia contracts (Murabahah, Mudharabah, Ijarah). Legally and normatively, double Value Added Tax (VAT) exposure on Murabahah and Ijarah Muntahiya Bittamlik (IMBT) has been resolved since Law No. 42 of 2009 and reaffirmed under Law No. 7 of 2021 on Harmonization of Tax Regulations (UU HPP) through Article 1A paragraph (1) letter h of the VAT Law, which establishes the pass-through principle (treating financing deliveries as direct transfers from suppliers to end-customers). However, operational risks persist due to Coretax data-matching algorithm mismatches when parsing electronic tax invoices (e-Faktur). Similarly, profit-sharing yields on Mudharabah and Musyarakah function as deductible cost of funds under Article 6 paragraph (1) letter a of the Income Tax Law (UU PPh), distinguished from non-deductible profit distributions under Article 9 paragraph (1) of the Income Tax Law; and (3) the role of Sharia Governance and firm transparency in mitigating compliance risks and optimizing corporate zakat as a tax-deductible expense under Article 9 paragraph (1) letter g of the Income Tax Law jo. Government Regulation No. 60 of 2010 (reducing taxable income, rather than acting as a direct tax credit). This research contributes an integrative conceptual framework bridging digital tax inputs with Islamic banking process governance and formulates a future research agenda. The study offers practical insights for tax authorities to establish Sharia-neutral digital tax modules and for Islamic bank managers to optimize automated tax risk management.