Implementation of the Principle of Fairness in the Settlement of Income Tax Disputes under Article 26 on Cross-Border Transactions

Abstrak

This study discusses the implementation of the principle of justice in resolving Income Tax Article 26 (PPh Pasal 26) disputes concerning cross-border transactions. International tax disputes often show a tension between procedural justice, which emphasizes formal compliance with legal rules, and substantive justice, which is oriented toward material truth and the economic substance of the transaction. Using a normative approach through philosophical, juridical, and sociological analysis, this study finds that MAP is more capable of realizing substantive justice compared to domestic litigation. Therefore, the optimization of MAP, the updating of digital taxation regulations, and judicial consistency in balancing procedural and substantive aspects are the main recommendations to strengthen the legitimacy and effectiveness of the Indonesian tax system. Domestic litigation channels in Indonesia tend to emphasize the procedural aspects, thereby potentially overlooking substantive justice for Non-Resident Taxpayers (WPLN). Conversely, the Mutual Agreement Procedure (MAP), regulated in Double Taxation Avoidance Agreements (P3B), offers a more collaborative, effective, and double taxation elimination-oriented resolution mechanism.