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Tax Invoices Not Based on Actual Transactions and Law Enforcement in
Indonesia: A Literature Review

Vincentius Murnawan Juli Sutanto1, Hasan Rachmany2, Nuryanti3

1 Administrative Science Study Program, concentration in Tax Administration and Policy, Postgraduate
Program of the Institute of Social Sciences and Management STIAMI

2 Administrative Science Study Program, concentration in Tax Administration and Policy, Postgraduate
Program of the Institute of Social Sciences and Management STIAMI

3 Communication Department, Universitas Jenderal Soedirman.

DOI: https://doi.org/10.51244/IJRSI.2025.1210000114

Received: 07 October 2025; Accepted: 15 October 2025; Published: 06 November 2025

ABSTRACT

Tax invoice fraud through fictitious transactions represents a persistent challenge to tax administration globally,
yet systematic investigation of enforcement mechanisms in emerging economies remains limited. This
systematic literature review examines the phenomenon of tax invoices not based on actual transactions
(TINBAT) in Indonesia, analyzing 47 scholarly sources, regulatory documents, and enforcement reports
published between 2018-2024.

Employing Agency Theory and Deterrence Theory as analytical frameworks, this study identifies a critical
research gap: while existing literature extensively documents TINBAT typologies and detection methods in
developed economies, empirical evidence regarding enforcement effectiveness and institutional coordination
mechanisms in developing country contexts remains scarce. Our thematic analysis reveals three key findings:
(1) technological advancement in invoice systems paradoxically creates both detection opportunities and
sophisticated evasion methods, (2) inter-agency coordination suffers from institutional fragmentation despite
formal cooperation frameworks, and (3) deterrent effects of sanctions are undermined by asymmetric
information and capacity constraints.

This review contributes to tax compliance literature by proposing an integrated enforcement framework that
synthesizes technological, institutional, and behavioral interventions. Policy implications suggest that effective
TINBAT prevention requires not merely regulatory tightening, but fundamental redesign of information
architecture, capacity-building initiatives targeting specialized competencies, and institutional mechanisms
enabling real-time data sharing across enforcement agencies.

Keywords: Tax Invoices Not Based on Actual Transactions, Law Enforcement, Tax Crime, Indonesia

INTRODUCTION

Tax Invoices Not Based on Actual Transactions constitute one form of tax crime that causes significant losses
to the state. These invoices are issued without any genuine transaction and are often utilized by taxpayers to
reduce their tax liabilities or unlawfully obtain tax refunds. Cases involving Tax Invoices Not Based on Actual
Transactions have become a serious threat to Indonesia’s taxation system, as they not only result in the loss of
state revenue but also trigger unfair business competition and undermine public trust in tax administration. In
2023 alone, the Directorate General of Taxes (DJP) recorded 29 cases of Tax Invoices Not Based on Actual
Transactions that reached the prosecution stage (P-21) or its equivalent3.

In practice, Tax Invoices Not Based on Actual Transactions can be issued through various modes of operation,
such as the use of shell companies that solely function as invoice issuers without engaging in real economic
activities, the misuse of Taxpayer Identification Numbers (NPWP), and manipulative transactions designed to

INTERNATIONAL JOURNAL OF RESEARCH AND SCIENTIFIC INNOVATION (IJRSI)
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increase tax credits that can be offset or fraudulently claimed as refunds9. These schemes are often difficult to
detect due to the involvement of complex networks of multiple actors collaborating to conceal such illegal
practices.

The phenomenon of Tax Invoices Not Based on Actual Transactions has become a major concern for the
Indonesian government because of its extensive impact on the national economy. According to the Directorate
General of Taxes Annual Report 2023, this practice has resulted in the loss of hundreds of billions to trillions of
rupiah in state tax revenue annually3. Moreover, it creates inequities within the taxation system, where compliant
taxpayers bear a greater burden due to fraudulent practices by certain business actors exploiting legal loopholes.

In recent years, law enforcement efforts against Tax Invoices Not Based on Actual Transactions have developed
significantly. The government has tightened regulations and renewed policies related to tax invoices by
implementing the e-Invoice (e-Faktur) system, aimed at enhancing transparency and minimizing opportunities
for tax abuse (Perdirjen No. PER-03/PJ/2022 as amended by Perdirjen No. PER-11/PJ/2022). The Directorate
General of Taxes has collaborated with law enforcement authorities such as the Indonesian National Police
(Polri) and the Corruption Eradication Commission (KPK) in handling large-scale cases of Tax Invoices Not
Based on Actual Transactions8. With regard to tax crime investigations, Civil Servant Investigators (PPNS) are
required to submit investigation results to public prosecutors through police investigators under the supervision
and coordination system (Korwas) of PPNS5. Furthermore, as part of the Criminal Justice System, the Directorate
General of Taxes also cooperates with the Supreme Court, the Ministry of Law and Human Rights, and the
Ministry of Immigration and Corrections. To trace assets for the purpose of evidence collection and recovery of
state revenue losses, PPNS may request data access or asset blocking from third parties such as Financial Service
Institutions (LJK), the National Land Agency (BPN), the Regional Police Traffic Directorate (Dirlantas), and
the Financial Transaction Reports and Analysis Center (PPATK) (DJP Circular Letter No. SE-29/PJ/2021).

Despite improvements in regulations and law enforcement, challenges in addressing Tax Invoices Not Based on
Actual Transactions remain significant. The key challenges include a shortage of human resources with
specialized expertise to detect fictitious transactions, the use of advanced information technology by perpetrators
to conceal transaction trails, and persisting legal loopholes that enable these practices to continue7. Therefore,
more comprehensive measures are required, including strengthening inter-agency cooperation, optimizing the
use of big data analytics in tax transaction monitoring, and enhancing taxpayer education on the legal risks of
engaging in Tax Invoices Not Based on Actual Transactions.

This article seeks to provide a deeper analysis of the concept of Tax Invoices Not Based on Actual Transactions,
the operational schemes employed, their impact on the economy, and the various law enforcement measures
applied in Indonesia. By conducting a literature review of academic sources, regulatory frameworks, and relevant
case studies, this study aims to offer a more comprehensive understanding of the challenges and solutions in
addressing Tax Invoices Not Based on Actual Transactions in Indonesia.

LITERATURE REVIEW

Definition and Characteristics

A Tax Invoice Not Based on Actual Transactions is defined as an invoice issued without a genuine transaction
or one created by unauthorized parties. This practice is often employed to evade tax obligations or unlawfully
claim tax credits, thereby causing losses to state revenue. According to the Directorate General of Taxes (DJP),
Tax Invoices Not Based on Actual Transactions represent one of the primary modes of tax crime that continues
to evolve and is increasingly difficult to detect, as tax offenders employ various methods to conceal their actions2.

These invoices are frequently issued by companies without clear economic activity. Such companies may exist
only administratively without engaging in real business operations, functioning solely to generate fictitious
transactions intended to illegally enrich certain parties9. Furthermore, these invoices can be used to claim tax
credits to which taxpayers are not legally entitled, thereby reducing state tax revenues and creating inequities
within the taxation system4. Some tax offenders even establish so-called shell companies, entities with no
genuine business operations, which exist solely to issue fraudulent invoices7.

INTERNATIONAL JOURNAL OF RESEARCH AND SCIENTIFIC INNOVATION (IJRSI)
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Another common method in the practice of Tax Invoices Not Based on Actual Transactions is the misuse of
Taxpayer Identification Numbers (NPWP). Offenders often use the NPWP of other companies without
authorization or even create fictitious NPWPs to fabricate documents that appear legitimate. By doing so, they
evade detection by tax authorities and continue their illegal practices more freely8.

With these characteristics, Tax Invoices Not Based on Actual Transactions pose a serious challenge to
Indonesia’s tax system. Their existence not only undermines state revenue but also distorts business competition,
as compliant companies are forced to compete unfairly with business actors exploiting legal loopholes for illicit
gain. Therefore, supervision and law enforcement against these practices must be strengthened to preserve the
effectiveness of the taxation system and ensure fairness in tax compliance.

The method of operation employed in the issuance of Tax Invoices Not Based on Actual Transactions is diverse
and continues to evolve alongside technological advancements and offenders’ efforts to avoid detection by tax
authorities. One common method involves the establishment of fictitious companies legally registered entities
without genuine business activities. These companies serve solely as tools for issuing invoices without any
underlying transactions, thereby creating the false appearance of economic activity to reduce tax liabilities9.

Additionally, offenders often engage in identity misuse as a strategy. In such cases, they use another company’s
identity without permission or establish companies with “puppet” or “anonymous” directors to commit tax
crimes1. As a result, tax liability is shifted to innocent parties. This technique significantly hampers tax
authorities in tracing and investigating such cases, as the rightful owners of the misused NPWP are often unaware
that their identities have been exploited. Similarly, the establishment of companies with puppet or anonymous
directors complicates efforts to identify the true beneficial owners who control these entities.

Transaction manipulation is another common method in the practice in the practice of Tax Invoices Not Based
on Actual Transactions. Here, tax offenders fabricate trade transactions that appear legitimate, despite no actual
business activity taking place. This method is typically employed to unlawfully obtain tax refunds, with the
intent of claiming reimbursements for transactions that never occurred. Consequently, the state suffers
substantial financial losses due to the disbursement of refunds to irresponsible taxpayers7.

Given the wide range of method in the practice, the practice of Tax Invoices Not Based on Actual Transactions
poses a significant challenge to Indonesia’s taxation system. Therefore, the government continues to strengthen
supervision and enhance regulations to minimize loopholes exploited in tax crimes and ensure rigorous legal
enforcement.

RESULT AND DISCUSSION

The Impact of Tax Invoices Not Based on Actual Transactions

Impact on the National Economy

Tax Invoices Not Based on Actual Transactions have highly detrimental effects on the national economy. One
of the primary impacts is the reduction of state revenue derived from taxation. Taxes that should be collected to
support infrastructure development, public services, and various government programs are not realized due to
these illegal practices. According to the Directorate General of Taxes Annual Report 2023, the use of Tax
Invoices Not Based on Actual Transactions results in potential state losses amounting to hundreds of billions to
trillions of rupiah annually.

In addition, Tax Invoices Not Based on Actual Transactions distort the market by providing unfair advantages
to companies engaged in such practices. Firms exploiting these invoices can illegally reduce their tax burdens,
while law-abiding companies must shoulder the full tax liability. As a result, business competition becomes
unhealthy, as certain market actors gain competitive advantages through illegal practices rather than through
efficiency or innovation9.

Another significant impact is the increasing cost of supervision and law enforcement. The government must
allocate substantial resources to detect, investigate, and prosecute cases involving Tax Invoices Not Based on

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Actual Transactions. Consequently, the taxation system must be continually updated with advanced technologies
to prevent tax crimes, such as the application of big data and artificial intelligence to monitor suspicious
transaction patterns. Nevertheless, challenges persist, as tax offenders continuously develop new methods that
are increasingly difficult to detect7.

Impact on Taxpayers

The effects of Tax Invoices Not Based on Actual Transactions are not limited to the state but also create
challenges for taxpayers who comply with tax regulations. One of the major consequences is legal uncertainty.
Taxpayers who inadvertently use such invoices for instance, in transactions with third parties unknowingly
issuing illegal invoices may still be subject to administrative or even criminal sanctions. This situation generates
uncertainty in the business environment, as companies are compelled to exercise greater caution in every
business transaction involving external parties4.

In addition, the administrative burden for tax-compliant companies also increases. Businesses must allocate more
time and resources to ensure that all invoices received and issued are legitimate. The verification process of tax
documents has become more complex, ultimately raising operational costs. This condition may hinder the growth
of small and medium enterprises (SMEs) that lack adequate administrative capacity to handle increasingly
stringent tax regulations8.

Given these negative impacts, it is crucial for the government to further tighten regulations and raise taxpayers’
awareness of the legal and economic risks associated with the use of illegal invoices. Strict law enforcement,
supported by advanced technology and enhanced monitoring systems, is a critical step toward eradicating these
practices and establishing a fair and transparent taxation system.

Law Enforcement on Tax Invoices Not Based on Actual Transactions in Indonesia

Applicable Regulations

The Government of Indonesia has issued various regulations to address the misuse of Tax Invoices Not Based
on Actual Transactions, strengthen a more transparent and accountable tax system, and reinforce law
enforcement against tax-related crimes. One of the main legal frameworks governing this issue is Law No. 6 of
1983 on General Provisions and Procedures of Taxation, which has been amended several times, most recently
by Law No. 6 of 2023 concerning the Enactment of Government Regulation in Lieu of Law No. 2 of 2022 on
Job Creation into Law. Meanwhile, provisions and mechanisms related to tax invoices and their crediting are
stipulated under Law No. 8 of 1983 on Value-Added Tax on Goods and Services and Sales Tax on Luxury
Goods, as amended several times, and most recently by the same Law No. 6 of 2023.

To further suppress the practice of Tax Invoices Not Based on Actual Transactions, the government has also
implemented an electronic tax invoice system (e-Faktur), regulated through Minister of Finance Regulations
(PMK) as well as implementing regulations issued by the Directorate General of Taxes (DJP), such as Director
General of Taxes Regulations (PER) and Circular Letters (SE). The e-Faktur system aims to reduce the potential
misuse of tax invoices by enhancing transparency and facilitating transaction traceability7.

Law Enforcement Efforts

In response to the widespread practice of Tax Invoices Not Based on Actual Transactions, the government has
undertaken various law enforcement measures involving multiple institutions. The Directorate General of Taxes
(DJP) has strengthened its monitoring system through the implementation of the e-Faktur system, which enables
real-time monitoring of invoices. This initiative aims to close loopholes for misuse by ensuring that every issued
invoice is based on clear and valid transactions2.

In addition, cooperation among institutions such as the Corruption Eradication Commission (KPK), the DJP,
and the Indonesian National Police (Polri) has been reinforced to handle cases involving Tax Invoices Not Based
on Actual Transactions. This inter-agency synergy is designed to ensure that investigations and prosecutions of
tax crime perpetrators are carried out more effectively. According to data from the Ministry of Finance, several

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major cases related to these fraudulent invoices have been successfully uncovered through the involvement of
various law enforcement bodies8. In practice, investigations conducted by Civil Servant Investigators (PPNS) of
the DJP are coordinated with other law enforcement authorities, such as the Attorney General’s Office and
Korwas PPNS Polri (KUHAP, 1981). Moreover, cooperation is also established with third parties to support
evidence collection and the recovery of state revenue losses, including financial service institutions (e.g., banks),
the National Land Agency (BPN), the Regional Police Traffic Directorate (Dirlantas Polda), and the Financial
Transaction Reports and Analysis Center (PPATK) (SE-29/PJ/2021).

For perpetrators proven to have engaged in the practice of Tax Invoices Not Based on Actual Transactions, the
government has imposed sanctions ranging from fines and business license revocation to imprisonment in
accordance with applicable laws and regulations. These sanctions are expected to serve as a deterrent and
enhance taxpayer compliance with the taxation system9.

Challenges in Law Enforcement

Despite various efforts, law enforcement against Tax Invoices Not Based on Actual Transactions still faces a
number of challenges. One of the primary obstacles is the lack of adequate human resources and technological
capacity to detect and respond to violations quickly and efficiently. The continuous evolution of tax-related
transactions requires more advanced monitoring systems and experts with in-depth knowledge of tax crime
schemes7.

In addition, the complexity of tax crime schemes poses a serious barrier. Increasingly sophisticated modus
operandi, such as the misuse of other companies’ identities or the establishment of shell companies, complicates
the ability of authorities to trace the intellectual actors behind these practices4. Offenders often rely on extensive
networks and involve multiple parties to conceal their tracks, making investigations more complex and time-
consuming.

The lack of taxpayer awareness regarding the risks and legal consequences of using Tax Invoices Not Based on
Actual Transactions further exacerbates the problem. Many taxpayers do not fully understand that involvement
in such practices may result in severe legal sanctions. Therefore, widespread education and public outreach
concerning the dangers and legal implications of these practices are crucial to improving taxpayer compliance
and preventing violations8.

Given these challenges, a more comprehensive strategy is required in enforcing laws against Tax Invoices Not
Based on Actual Transactions. Strengthening monitoring capacity, leveraging modern technology, and
enhancing inter-agency coordination are critical steps to eradicate these illegal practices and establish a fair and
transparent taxation system.

CONCLUSION

Tax Invoices Not Based on Actual Transactions represent a form of tax crime that poses serious implications for
state revenue and fairness within the taxation system. This practice not only causes significant financial losses
to the state but also creates inequities for taxpayers who comply with tax regulations. Although the government
has taken various measures to address this issue, challenges in monitoring and law enforcement remain major
obstacles. The growing complexity of tax crime schemes and the limited resources available for oversight make
it difficult to completely eradicate the use of Tax Invoices Not Based on Actual Transactions.

To address this issue, a more comprehensive strategy is required. One important step is enhancing the monitoring
system by optimizing modern technologies such as big data and artificial intelligence. These tools can help detect
suspicious transaction patterns more effectively and accelerate the investigation process by tax authorities. In
addition, taxpayer education is also crucial in reducing the misuse of tax invoices. Increasing awareness of the
legal consequences of engaging in Tax Invoices Not Based on Actual Transactions may discourage business
actors from participating in such practices.

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Furthermore, cross-institutional coordination as part of the Criminal Justice System involving the Directorate
General of Taxes, the Indonesian National Police, the Attorney General’s Office, the Supreme Court, the
Ministry of Law and Human Rights, the Ministry of Immigration and Corrections, as well as the Corruption
Eradication Commission needs to be continuously strengthened. Close cooperation among these institutions is
essential in addressing large-scale cases involving syndicates and extensive networks. With improved data
integration and stronger coordination, investigations into tax crime offenders can be conducted more effectively
and comprehensively. In addition, collaboration with third parties such as financial service institutions (LJK),
the National Land Agency (BPN), the Traffic Directorate of the Regional Police (Dirlantas Polri), and the
Financial Transaction Reports and Analysis Center (PPATK) must be enhanced to trace assets of offenders for
blocking and seizure in favor of the state.

By implementing these strategic measures, law enforcement against Tax Invoices Not Based on Actual
Transactions in Indonesia is expected to become more effective and generate positive impacts on the taxation
system as a whole. The enforcement of stricter regulations, the use of advanced technologies, as well as taxpayer
education and inter-agency cooperation are key elements in establishing a taxation system that is more
transparent, fair, and accountable.

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