developing payroll system for effective tax - Repository UNAIR

DEVELOPING PAYROLL SYSTEM FOR EFFECTIVE TAX

PLANNING OF INCOME TAX ART. 21 IN COMPANY SS

TANGERANG

UNDERGRADUATE THESIS

SUBMITTED TO FULFILL PARTIAL REQUIREMENT OF

BACHELOR DEGREE IN ACCOUNTING

SUBMITTED BY:

GITARANI PRASTUTI

STD. ID: 040811615

TO

FACULTY OF BUSINESS AND ECONOMY AIRLANGGA

UNIVERSITY

SURABAYA

2012

ADLN - Perpustakaan Universitas Airlangga

Skripsi Developing Payroll System For Effective Tax Planning Of Income Tax Art. 21 In Company SS Tangerang

Gitarani Prastuti

Developing Payroll System for Effective Tax Planning

of Income Tax Art. 21 in Company SS Tangerang

Undergraduate Thesis

Submitted to fulfill partial requirement of Bachelor Degree in

Accounting

Submitted By:

GITARANI PRASTUTI

STD. ID: 040811615

TO

FACULTY OF BUSINESS AND ECONOMY AIRLANGGA UNIVERSITY

SURABAYA

2012



Gitarani Prastuti

UNDERGRADUATE THESIS

DEVELOPING PAYROLL SYSTEM FOR EFFECTIVE TAX

PLANNING OF INCOME TAX ART. 21 IN COMPANY SS

TANGERANG

SUBMITTED BY:

GITARANI PRASTUTI

STD. ID : 040811615

HAVE BEEN ACKNOWLEDGED AND WELL ACCEPTED BY THE

COUNSELOR LECTURE,

SUPERVISOR,

ALFA RAHMIATI, SE.,MM.,Ak. AT THE DATE……………………

HEAD OF BACHELOR OF ACCOUNTING MAJOR,

Drs. AGUS WIDODO M.,MSi,.Ak. AT THE DATE……………………



Gitarani Prastuti

Surabaya,………………………………..

This thesis was complete and subject to be examined

Supervisor,

ALFA RAHMIATI SE., MM.,Ak.



Gitarani Prastuti

ACKNOWLEDGEMENTS

In The Name of Allah, Most Gracious, Most Merciful

Praise be to Allah, the Cherisher and Sustainer of the Worlds. I thank You

with all of my heart, finally I finished my study which means also finish my

undergraduate thesis on time. You are the one who keeps my spirit alive.

A special recognition goes to Mr. Muslich Anshori and his associates that I

can’t mention all as a Dean of Faculty of Business and Economics, Mr. Agus

Widodo SE., Ak. as being my Head Accounting Department for about three and

half years, Mrs. Alfa Rahmiati SE., MM., Ak. as my thesis supervisor and

taxation specialization subject. You know Ma’am, I’m grateful could meet and

know you, moreover having you as my supervisor. I’m having a pleasure time

with you. Mrs. Amalia Rizky SE., MM., Ak. as my counselor lecturer, I thank

you, with your great advice so I could develop myself well. Mrs. Devi S. Kalajanti

SE., MM., Ak as English Class Supervisor. Ma’am, sure I’ll be missing your

kindness and your sweet smile. Lecturers who inspired me; Mr. Khusnul Prasetyo

as my favorite lecturer, Professor Tjiptohadi, your experience and support are

inspiring me to dare to try something new . Mrs. Debby, your words are always be

remembered by me, and others that I can’t mention it all. With all of my heart

thank you for all of your knowledge and support.

The Academic Department; Dra. Luluk Djatmiko as Head of Department

and partners that I can’t mention them all. I thank you for all of your great work.



Gitarani Prastuti

Love and big hugs for my family, Mom and Dad, thank you for all of your

support in any form. My Granny (deceased), thank you for your love and care,

.Granny and Grandpa in Bandung, thank you and I love you. My two sweet bro;

Prabu and Pandu, though sometimes you’re so silly and spoilsport but hey, I miss

you really! LOL

Rahmat Rizal Alfaries, as partner of my heart, buddy, friend, and foe, thank

you for being with me ‘till now and what you’ve scarified for me. We’ve shared

laugh, smile, and cry together along this way.

My buddies from 39 SHS a.k.a Galan who always on my side, Lia Septiana

a.k.a Roniii!! Roniku cintaku kapan kencan lagii?? Tar kalo gw dah pulang

ngayeng yak?. Yawan Shiffer a.k.a Korve.Pe, masih jualan akua lu??kerja keras

yak!!.kasian tu si anca nungguin lo dirumah, wkwkwkwk. Thank you for making

me and roni ROFL all the time when we see ur photo! Muhammad Nurdiansyah

a.k.a Ancaaaa. Ih si bos anca kmana aje sih lo?ga pernah nongol ni kalo di tag

namanya. Thank you buddies for being my BBF ‘till now, kangen kaliaaan. My

best friend Leny Andriyani a.k.a Jeeeenk!! Remember my last message for you,

will ya?. My betsie in EC, Aulia Hidayati a.k.a Auul!! Thank you Auul for

everything! Hey, come to my house, will ya? Ma boarding house friends; Dina,

Iis, Mutia, Mbak Risna, Rara (thx for ur help anyway! *hugs), Winda, Anita, and

predecessors. My English Class friends, school friends, and others that I can’t

mention them all.

I also want to thank my internship friend; Indah, Diva, Reza, and Andreas.

It’s such a pleasure to know you though we only have a short time. Ayo jeenk



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katanya mau jalan-jalan??. Mr. Hans Aulia Utama Hasibuan as my Internship

Supervisor at Central Bank, thank you for the great opportunity and your

kindness.

Special thanks to my sweet and nice bro in Maldives, Jaiilam and Jaishan

Amir. I’m glad to know you, and sharing happiness with you. Hopefully I can go

to Maldives so I could meet you! My buddy Moataz Abdel Aziz a.k.a “Mo”.

Thaaaaaank for dropping me by often; chewing fat with you is exiting, and

laughing wid yew is superb! My sister-alike Fabiola Mendoza, thank you as being

my great sis in SL,wow! I heard you just moved in to NZ, congrats sis! My nice

Alexandrian friend; Batie, Amy, Sara, and Mido thank you for always tagging me

nice story and poem. Also Mohammed, Sultan Patel, and Taimoor Ehsan, Sundar,

and others, thank you for always keep our friendship bond stronger.

I thank peoples who are participating in the arrangement of this

undergraduate thesis directly or not. I never forget the people and friends I’ve lost,

or dream that have faded.

Last but not least, The researcher also wants to apologize of there is any

mistake or undesired words created in this undergraduate thesis.

Surabaya, February 25th

2012

Researcher



Gitarani Prastuti

Statement of Declaration

I, (Gitarani Prastuti, 040811615), declare that:

1. My thesis is genuine and truly my own creation, and is not another’s person

work made under my name, nor a piracy or plagiarism. This thesis has never

been submitted to obtain an academic degree in Airlangga University or in any

other universities/colleges.

2. This thesis doesn’t contains any work or opinion written or published by

anyone, unless clearly acknowledged or referred to by quoting the author’s

name and stated in the References.

3. This statement is true; if on the future this statement is proven to be dishonest

and fraud, I agree to receive an academic sanction in the form of removal of

the degree obtained through this thesis, and other sanctions in accordance with

the prevailing norms and regulations in Airlangga University.

Surabaya,……………………………..

Declared By,

Gitarani Prastuti,

Std. ID. 040811615



Gitarani Prastuti

ABSTRACT

Tax planning for income tax art.21 is an alternative way to reduce tax

payable in a good manner. It could perform well if supported by a good payroll

system. A good system is required to perform an effective and efficient business

process, such as reduce paper redundancy and saving time, and reduce human

error.

Company SS desires to perform business expansion in 2012. Hence, the

company should prepare a good system and sufficient funds. To do so, Company

SS wants to perform an effective tax planning in this part which is for income tax

art.21 collected from its’ employees that could create higher return for both

company and employees. To perform it smoothly, Company SS also supported by

developing its’ current payroll system to support business expansion and its’

taxation for payroll system.

Keywords: Tax Planning, Income Tax Art. 21, Payroll System



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TABLE OF CONTENTS

COVER

APPROVAL LETTER

ACKNOWLEDGEMENT

ABSTRACT

CONTENTS

TABLE LIST

FIGURE LIST

ATTACHMENTS

CHAPTER I : INTRODUCTION………………………..……. 1

1.1 Background……………………………………………. 1

1.2 Formulation of Problem………………………………. 2

1.3 Research Motivation………………………………….. 2

1.4 Contributions………………………………………….. 3

1.5 Systematic Writing Proposal………………………….. 3

CHAPTER II : LITERATURE REVIEW…………………….. 5

2.1 Underlying Theories…………………………………… 5

2.1.1 Tax…………………………….…………….…....... 5

2.1.2 Income Tax…………………………………..……. 6



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2.1.2.1 Income Tax Art.21………………………. 6

2.1.2.2 Income Tax Art.21 Subject………………. 7

2.1.2.3 Income Tax Art.21 Object……………….. 9

2.1.2.4 Non-Taxable Income…………………….. 12

2.1.2.5 Taxable Income………………………….. 13

2.1.2.6 Calculation of Income Tax Art.21 and

Income Tax Bracket……………………. 17

2.1.3 Tax Collection System……………………. 18

2.1.3.1 Official Assessment System……. 19

2.1.3.2 Self Assessment System………... 19

2.1.3.3 Withholding System…………….. 19

2.1.3.3.1 Income Tax Art.21

Withholder…………… 26

2.1.4 Additional Laws to Income Tax Art.21….. 26

2.1.5 Tax Planning……………………………... 27

2.1.5.1 Tax Planning Framework………. 30

2.1.5.2 Tax Management……………….. 31

2.2 System, Data and Information………………………. 33



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2.2.1 Accounting Information System………………... 34

2.2.2 Data Flow Diagram……………………………… 35

2.2.3 Flowchart………………………………………… 36

2.2.4 Payroll and Payroll System……………………... 36

2.2.5 System Development…………………………… 38

2.2.5.1 System Planning…………………………… 39

2.2.5.2 System Analysis…………………………… 39

2.2.5.3 System Design…………………………........ 41

2.2.5.4 System Implementation………………........ 42

2.2.6 Software…………………………………………. 42

2.3 Previous Research……………………………………. 43

CHAPTER III………………………………………………….. 45

3.1 Research Approach………………………………….. 45

3.2 Research Scope………………………………………. 45

3.3. Data Type and Source………………………………. 46

3.4 Data Collecting Procedure………………………….. 46

3.5 Analysis Technique………………………………….. 48

CHAPTER IV………………………………………….……….. 51



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4.1 General View of Research Subject……………..……… 57

4.1.1 History of Company SS…………………………….. 57

4.1.2 Organizational Structure of Company SS……….…. 58

4.2 Research Result………………………………………… 60

4.2.1 Research Result through Existing

Procedure of Income Tax Art.21 Collection……… 60

4.2.2 Existing Company’s Payroll Policy……………….. 62

4.2.3 Existing Payroll System…………………………… 63

4.2.4 Research Result Description……………………… 71

4.2.4.1 Research Result through Withholding Method 71

4.2.4.2 Research Result through Company Policy….. 72

4.2.4.3 Research Result through Payroll System……. 73

4.3 Research Solution………………………………………. 75

4.3.1 Recommendation through Procedure of

Income Tax Art.21……………………………….. 75

4.3.2 Recommendation through Company Policy……. 81

4.3.3 Recommendation through Company System…... 83

.



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CHAPTER V……………………………………………………… 96

5.1 Conclusion……………………………………………… . 96

5.2 Recommendation……………………………………….. 97

REFERENCES………………………………………………….... 98

ATTACHMENTS………………………………………………… 100

Salary Expense Recapitulation in 2010……………………. 100

Salary Expense Recapitulation in December 2010………... 101

Recapitulation of Income Tax Art.21 Expense

For Permanent Employees in 2010………………………. 102

Recapitulation of Income Tax Art.21 Payable

For Permanent Employees in 2010……………..………. 103

Recapitulation of Income Tax Art.21 Payable

For Permanent Employees in December 2010…………. 103

Recapitulation of Wage Expense in 2010…………………. 104

Recapitulation of Income Tax Expense in 2010………….. 105

Application of Gross-Up Method for Permanent Employee

In 2010…………………………………………………... 106



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Application of Gross-Up Method for Permanent Employee

In December 2010………………………………………... 107

Calculation of Tax Allowance for Permanent Employee

in 2010………………………………………………….. 108

Calculation of Tax Allowance for Permanent Employee

in December 2010……...……………………………….. 109

List of Tax Allowance for Non-Permanent Employee

in 2010………………………………………………….. 110

Recapitulation of Wage Expense by Gross-Up Method

and Fringe Benefit for Non-Permanent Employees……. 111

Interview List………………………………………………... 112

Company Letter of Approval……………………………… 133



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TABLE LISTS

Figure 2.1 – Input / Output Symbols………………………… 10

Figure 2.2 – Processing Flowchart…………………………… 11

Figure 2.3 – List of Storage Symbols………………………… 12

Figure 2.4 – Flow and Miscellaneous Symbol…………..…… 13

Figure 2.5 – List of Non-taxable Income………………….….. 33

Figure 2.6 – Taxable Income Layer…………………………. 38

Figure 2.7 – Gross Up Calculation…....................................... 41

Figure 2.8 – Tax Allowance Formula……………………….. 41

Figure 2.9 – Evaluation of Net, Gross, and Gross-up Method

of Income Tax Art.21………………………….…. 43

Figure 2.10 – Evaluation of Comprehensive Income for each

Income Tax Art.21 Method……………..……… 45

Figure 2.11 – General Framework of Tax Planning………… 50

Figure 4.2 – Company SS Policies through Payroll…………. 63

Figure 4.5 – Salary Expense Recapitulation…………………. 70

Figure 4.6 – Salary Expense in December 2010……………… 71

Figure 4.7 – Recapitulation of Income Tax Expense

for Permanent Employee………………………... 72

Figure 4.8 – Recapitulation of Income Tax Expense

for Permanent Employee in December 2010……. 72

Figure 4.9 – Wage Expense Recapitulation in 2010…………… 74



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Figure 4.10 – Recapitulation of Income tax Art.21 Expense for

Non-permanent Employees…………………….. 75

Figure 4.11 – Company’s Comprehensive Income in 2010……. 76

Figure 4.12 – Proposed Company Policies through Payroll

for Permanent Employees………………………. 82

Figure 4.13 - Proposed Company Policies through Payroll

for Non Permanent Employees…………………. 83

Figure 4.16 – Recapitulation of Gross-Up Method for

Permanent Employees………………………….. 94

Figure 4.17 - Recapitulation of Gross-Up Method for

Permanent Employees in December 2010……… 95

Figure 4.18 – Recapitulation of Income Tax Art. 21

Allowance For Permanent Employees………….. 96

Figure 4.19 - Recapitulation of Income Tax Art. 21

Allowance For Permanent Employees for

December 2010………………………………….. 97

Figure 4.20 – Recapitulation of Meals Expense………………... 99

Figure 4.21 – List of Tax Allowance – Non-permanent Employee 100

Figure 4.22 – Recapitulation of Wages…………………………. 101

Figure 4.23 – Statement of Comprehensive Income after

Recommendation…………………………………. 102

Figure 4.24 – Evaluation through After Tax Income,

Take Home Pay, and Disbursement………………. 103



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FIGURE LISTS

Figure 3.1 – Conceptual Thinking………………………….. 59

Figure 4.1 – Organizational Structure of Company SS…….. 62

Figure 4.3 – Existing Flowchart of Payroll System

for Permanent Employees…………………….. 66

Figure 4.4 – Existing Flowchart of Payroll System

for Non-Permanent Employees………………. 68

Figure 4.14 – Proposed Flowchart of Payroll System

for Permanent Employees……………………. 85

Figure 4.15 – Proposed Flowchart of Payroll System

for Non-Permanent Employees………………. 89



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CHAPTER 1

INTRODUCTION

1.1 Background

Tax takes essential role in an economic condition of a country and

becomes an obligation of the society in any kind of layer, in form of business or

as individual tax payer. Society obtains facilities from government in form of

public goods and services which are obtained by tax, such as public telephones,

highways, bridges, etc.

Somehow, taxes turn out become encumbers for enterprises. Reluctant or

not, taxes imposed company’s profit, hence they obligate to pay tax. Until now

and then, taxes still become big dilemma from among of them. They are willing to

pay just because the regulation said so.

Since the necessity between enterprises and government is different,

enterprises are having tendencies to minimize tax. Tax planning is a treatment to

minimize yearly tax payable by taking advantage in regulation’s loopholes.

Company SS as business entity running its business in procurement goods

and services. Planning for business expansion in 2012, Company SS tries to

generate higher income tax return and develop its’ current payroll system and

payroll policy. However, several limitations such as limited human resource

becomes a big problem that should be considered why Company SS cannot

develop it’s payroll system and perform tax planning well.



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Facing those facts, an adequate tax planning for income tax art.21,

developing the existing system and payroll policy improvement are several keys

to enhance business’s performance.

1.2 Formulation of Problem

Toward the explanation above, the formulation of problems are:

1. “What is the best tax planning treatment for permanent employees and

non-permanent employees of Company SS for greater after-tax return?”

2. “How to develop payroll system of Company SS in order to establish tax

planning for income tax art.21 and a good payroll policy?”

1.3 Research Motivation

The research motivations of this proposal are following:

1. Seek the implementation of tax planning for both permanent and non-

permanent employee by considering the tax collection method applied and

deductible expense based on the General Provision of Taxation Procedure.

2. Recognize tax savings generates by company

3. Recognize employees’ take home pay

4. Develop existing payroll system of Company SS that will accelerate the

performance of tax planning of income tax art.21

5. Develop existing payroll policy for both permanent and non-permanent

employee



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1.4 Research Contributions

Several contributions are made for this research stated as following:

1. Provide information to company about the great impact on companies’ after-

tax return by the implementation of tax planning for company in treating tax

art. 21 and give recommendation for improvement and corrective actions for

its’ current payroll system and payroll policy

2. Give practical knowledge about the implementation of tax planning in field

and payroll system development

3. As the reference for the next research within this field of research of the

importance of tax planning and adequate payroll system particularly for

income tax art.21

1.5 Systematic Writing Proposal

To make research become easier to understood, this research divide to

some chapter consist of subchapter arranged systematically as follow:

CHAPTER I : INTRODUCTION

This chapter depicts the background of the problem, formulation

of problem, research objective, research contribution, and

systematic writing proposal. In short, chapter 1 describes the

reason why having good payroll system is important before the

company arranges tax planning of income tax art.21. To advance



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tax planning, the company must know the appropriate regulation

and maintain the changing in order to run it well.

CHAPTER II : THEORETICAL REVIEW

This chapter contains underlying theories of payroll system, such

as system planning, analysis, implementation and tax regulations.

CHAPTER III : RESEARCH METHODOLOGY

This chapter describes about the type of research, scope of

research, types and source of data used, data collecting procedure,

and technical analysis used.

CHAPTER IV: RESEARCH RESULT AND DISCUSSION

This chapter focuses on research result obtained from the research

and observation done in Company SS in form of company’s

general view, and continues with description of research result,

discussion and evaluation.

CHAPTER V : CONCLUSION AND RECOMMENDATION

This chapter contains of conclusion and the further

recommendations that might be advantageous for enterprise

which derived from the research. Literature also included on this

chapter.



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CHAPTER 2

LITERATURE REVIEW

2.1 Underlying Theories

2.1.1 Tax

Tax is an obligation of society in any kind of layer. Almost all business

activities can’t be separated from taxes and tax regulation. Thus, we need to

completely understand tax regulation. Several tax expertise define term of tax; one

of them is Prof. Dr. H. Rohmat Soemitro (Zain 2007:11) stated the term of tax as

following:

“Tax is the conversion of public’s wealth to government’s inflow for

regular expenditures while its surplus are used to public saving that as the main

source to afford public investment”

Hence, we can conclude the criteria that related to the definition of tax are:

a. Collected by government, in this case represented by central or regional

government where the collection is based on the amendment.

b. Utilize in affording government activities and expansion to provide public

welfare.

c. Contribution to government that able to insisted, means if the tax payer is

negligent due to his/her obligation, then it’s able to claimed by force through

warning letter or compulsion letter.

d. As the regulation and budgetary function.



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The budgetary function means tax becoming one of nation’s inflows to

afford the government activities and expansion. The budgetary function must be

consistent with the regulated one; to regulate or establish social and economic

policies in case to accelerate the establishment of social thriving. Such as regulate

or limiting the society’s consumption, doing the income redistribution, giving

incentives to the economic growth and investment, and others.

From business perspective, tax is a burden. Entrepreneurs will treat taxes

as an unavoidable business reality. Those kind of impact means somewhat

important, so that taxes is a components which must have a serious supervision,

and becoming factor which decide businesses’ flow.

2.1.2 Income Tax

As stated in the fourth amendment to the law number 7 year 1983 regarding

income tax (law number 36/2008), income is which is any increase in economic

capability received or accrued by taxpayer, whether originating from Indonesia

and outside Indonesia, which can be used for consumption or to increase the

wealth of taxpayer, with the name and in whatever form.

2.1.2.1 Income Tax Art. 21

As stated in art. 1 no. 1 Kepdirjen No. KEP-545/PJ./2000 , term of income

tax art.21 is a tax on income in the form of salaries, wages, honoraria, allowances,

and other payments received or accrued by an individual taxpayer in the country

in connection with a job or position, services, and activities. Several underlying



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regulation related to the implementation of income tax art. 21 are stated as

following:

1. The Fourth Amendment to the Law Number 7 Year 1983 Regarding Income

Tax (Law Number 36/2008) of general provisions of taxation procedures.

2. Regulation of the minister of finance number 254/PMK.03/2008 about

stipulation of part of income with respect to work of daily and weekly workers

as well as other non-permanent workers not subject to the withholding of

income tax

3. Government regulation of Indonesia Republic no. 94 year of 2010 regarding

government regulations regarding the calculation of taxable income and

income tax payment in certain period.

2.1.2.2 Income Tax Art.21 Subject

As stated in the fourth amendment to the law number 7 year 1983

regarding income tax (law number 36/2008), income recipient who withheld

income tax art. 21 are stated as following:

1. State officials including president, vice president, parliaments / assemblies

consent of the governed, the local legislative provincial / city / district,

supreme audit board, supreme court, supreme board consideration, the

minister of state / young, attorney general, governor, regent, and mayor.

2. Civil employees, is central civil employees, regional civil employees, and

others civil employees which regulated by government regulation in

constitution no. 8 year of 1974.



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3. Employees, is any person, who is doing work under contract or employment

agreement either written or not, including those doing job in the country or

state owned enterprises or enterprises owned by region.

4. Permanent employees, is an individual who works to the employer, who

receive or earn salary in certain amount at regular intervals, including

members of the board of commissioners and the supervisory board which

regularly and continuously participate in managing company's activities

directly

5. Foreign employees, is an individual who does not reside in Indonesia not

later than 183 days within a period of 12 months who receive or earn salary,

honoraria and / or other compensation with respect to employment, services,

and activities.

6. Irregular employees, is personal taxpayer who receive salary if only they

work.

7. Pension Recipients, is an individual or their heirs who receive or obtain

compensation for work performed in the past, including persons or their heirs

who receive retirement savings or retirement allowance.

8. Recipients of honoraria, is individuals who receive or obtain compensation

in connection with position, or related activities done by them.

9. Recipients of wage, individuals who receive daily wages, weekly wages,

intact wages, or single wages.



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Person or statutory bodies that are excluding as income tax art.21 subject are

stated as following:

1. Diplomatic representatives and consular officers or other officials of

foreign countries, and those who had been told they are working on and

living with them, provided that:

a. Not Citizen Indonesia

b. Not receive or earn other income from outside the office in Indonesia

c. State concerned to give reciprocal treatment

2. Official representatives of international organizations as referred to in the

decision of finance ministers 576/KMK.04/2000 number as last amended

by the finance minister's decision 601/KMK.03/2005 numbers along

a. Not a citizen of Indonesia.

b. Not engaged in business or activity or other work to earn income in

Indonesia.

2.1.2.3 Income Tax Art. 21 Objects

Several income imposed by withholding tax art. 21 are stated as following:

a. Income received or accrued by an employee or a regular pension recipients

in the form of salary, monthly pensions, wages, honoraria (including

honoraria by the commissioners or members of the board of trustees),

monthly premiums, overtime pay, dole, waiting for money, compensation,

benefits, wife, child allowances, allowances for overpriced, office

allowances, special allowances, transport allowances, tax allowances,



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pension benefits, children's education allowances, scholarships, insurance

premiums paid by employers, and other regular income by any name;

b. Income received or accrued by employees, former employees receiving

retirement or irregularly in the form of production services, bonuses,

gratuities, leave allowances, holiday allowances, allowances for the new

year, bonuses, annual premiums, and other similar income who are not

permanent;

c. Daily wages, weekly wages, unit wage and piece rate received or obtained

by temporary employees or freelance workers, as well as pocket money

daily or weekly participants received education, training or apprenticeship

which is a candidate for officer.

d. Ransom retirement, saving for old age or Old Age Security, severance pay

and other similar payments in connection with termination of employment;

e. Honorarium, allowance, gift or award with the name and in whatever

form, commissions, scholarships, and other payments as benefits relating

to employment, services, and activities undertaken by individual taxpayers

in the country, consisting of:

1. Professionals (Lawyers, Accountants, Architects, Doctors, Consultants,

Notary, Appraisers, and Actuaries).

2. Musicians, emcee, singer, comedian, movie star, the star of soap

operas, commercials, director, film crew, photo model, the player

plays, dancers, sculptors, painters and other artists;

3. Athlete;

4. Advisers, teachers, coaches, preachers, counselors, and the moderator;



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5. Author, researcher, and translator;

6. Service providers in all areas including engineering, computer and

application systems, telecommunications, electronics, photography,

economic and social;

7. Advertising agencies;

8. Supervisors, project managers, members and providers of services to a

committee, and participants of the hearing or meeting;

9. Bearer of the order or who finds a subscription;

10. Participants of the race;

11. Official merchandise vendors;

12. Foreign service officers insurance;

13. Participant education, training and apprenticeship are not employed or

not as a prospective employee;

14. Multilevel marketing companies or distributors of direct selling and

other similar activities.

15. Wages, salaries of honor, other benefits related to salary and

remuneration or other benefits received are not fixed by the State

Officers, Civil Servants and pensions and other benefits that are related

to pensions received by retirees including widow or widower and / or

their children.

Excluding the income tax collection of Article 21 are stated below:

1. Insurance payments from the company's health insurance, accident insurance,

life insurance, endowment insurance, and scholarship insurance;



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2. Receipts in kind and enjoyment in any form provided by the taxpayer or the

Government, not the exception granted by the Government other than the

taxpayer or the taxpayer who is subject to final income tax and income tax

imposed by a special calculating norms (deemed profit).

3. Pension contributions paid to pension funds that establishment has been

approved by the Minister of Finance and Old Age Security contributions to the

body administering Social Security paid by the employer,

4. Alms received by an individual who has the right of the agency or institution

of Zakat established or approved by the Government.

5. Scholarships that meet certain requirements (art. 3 (1) Income Tax Act).

Provisions are set further in the Regulation of the Minister of Finance No.

246/PMK.03/2008

2.1.2.4 Non-Taxable Income

Based on the regulation of Director General of Taxation PER-31/PJ/2009,

non-taxable Income (NTI) is the limit of income for employee which is imposed

to income tax. Amount of NTI depends on the marital status and dependants of

employee started in the beginning of tax year. The calculation of NTI for personal

taxpayer stated on The Fourth Amendment to the Law Number 7 Year 1983

Regarding Income Tax (Law Number 36/2008) are stated on the next page:



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Figure 2.1

List of Non-taxable Income (NTI)

Status Monthly Yearly

Single with no dependants (S/0) IDR 1,320,000 IDR 15,840,000

Married with no dependants (M/0) IDR 1,430,000 IDR 17,160,000

Married with one dependant (M/1) IDR 1,540,000 IDR 18,480,000

Married with two dependants (M/2) IDR 1,650,000 IDR 19,800,000

Married with three dependants (M/3) IDR 1,760,000 IDR 21,120,000

Source: The Fourth Amendment to the Law Number 7 Year 1983 Regarding

Income Tax (Law Number 36/2008)

2.1.2.5 Taxable Income

As stated in The Fourth Amendment to the Law Number 7 Year 1983

Regarding Income Tax (Law Number 36/2008), taxable income (TI) is a base of

calculation to determine art. 21 payable received by personal taxpayer for a year.

For resident taxpayer, there are two way in determining taxable income (TI);

bookkeeping and norm. To determine the amount of the taxable income of a

resident taxpayer and a permanent establishment, these shall remain non

deductible:

a. Profit share by any name and in any form whatsoever, such as dividend,

including dividend paid by an insurance company to a policy holder, and

share of the remainder of business profit of a cooperative;

b. Cost incurred or expended for any personal interest of shareholder,

partner, or member;



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c. The formation or accumulation or reserve funds, except:

1. Uncollectible receivables reserve for a bank business and other

business entity distributing credit, optional leasing consumer financing

company and factoring company;

2. Reserve for insurance business, including social assistance reserve

formed by the operating board of social security;

3. Guaranty reserve for deposit underwriting institution;

4. Reclamation cost reserve for a mining business;

5. Re-investment cost reserve for forestry business; and

6. Reserve of cost of closure and maintenance of industrial waste

disposal place for waste treatment industry with the provision and

requirements thereof stipulated by or on the basis of a regulation of

the Minister of Finance;

d. Health insurance premium, accident insurance, life insurance, dual

benefit insurance, and scholarship insurance, paid by the taxpayer

individual person, except if paid by an employer and the premium is

calculated as income for the relevant taxpayer.

e. Reimbursement or reward in connection with work or service given in

kind and benefit, except the provision of food and beverage for all

employees and also reimbursement or reward in kind and benefit in

certain regions and which is related with the execution of work stipulated

by or on the basis of a regulation of the Minister of Finance;



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f. The sum which exceeds fairness which is paid to a shareholder or to a

party having special relationship as reward in connection with work

done;

g. Wealth which is granted, assistance or contribution, and inheritance as

intended in art.4 paragraph (3) letter a and letter b, except the donation as

well as zakat (religious charity) received amil zakat agency or institution

established or legalized by the government or compulsory religious

donation of followers of religions recognized in Indonesia, which is amil

zakat (charity) organization or amil zakat institution set up and legalized

by the Government, with the provision thereof ruled by or the basis of a

government regulation;

h. Income tax;

i. Cost imposed or expended for the personal interest of the taxpayer or any

person becoming his/her dependent;

j. Salary paid to a member of association, firm, or comanditer (partially

limited liability) company whose capital is not divided into dividends;

k. Administrative sanction in the form of interest, fine, and rise and also

criminal sanction in the form of fine relating to the execution of law in

the field of taxation.

The amount of taxable income for a resident taxpayer and a permanent

establishment shall be determined on the basis of the gross income subtracted by

costs required to collect and maintain the income, including:



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a. Cost directly or indirectly related to business activity, among other:

1. Cost of material purchase;

2. Cost relating to work or service including wage, salary, honorarium,

bonus, gratuity, and allowance granted in the form of money

3. Interest, rent royalty;

4. Travel expense;

5. Waste treatment cost;

6. Insurance premium;

7. Promotion and selling cost ruled by or on the basis of a regulation of the

Minister of Finance;

8. Administrative cost

9. Taxes other than income tax;

b. Depreciation of expense to acquire a tangible asset and amortization of expense to

acquire right and on other cost having a benefit period of more than one (1) year;

c. Contribution to a pension fund the establishment of which has been legalized by

the Minister of Finance;

d. Loss due to the sale or transfer of asset owned and used in a company or owned to

gain, collect and maintain income;

e. Loss arising from difference of foreign currency exchange rate;

f. Cost of company’s research and development activity executed in Indonesia;

g. Cost of scholarship, apprenticeship, and training;

h. Receivable decidedly uncollectible



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i. Donation in the framework of national disaster mitigation with the provision

thereof ruled by a government regulation;

j. Donation in the framework of research and development executed in Indonesia,

with the provision thereof ruled by government regulation;

k. Cost of development of social infrastructure with the provision thereof ruled by a

government regulation;

l. Donation of education facilities with the provision thereof ruled by a government

regulation, and;

m. Donation on the framework of sports development with the provision thereof

ruled by government regulation.

2.1.2.6 Calculation of Income Tax Art. 21 and Income Tax Art. 21 Bracket

Steps in calculating income tax art.21for permanent employee are:

1. Set the gross salary received by the employee

2. Deduct the amount by certain allowances and profession cost (net salary)

3. Deduct net salary by non-taxable income (Taxable income)

4. Calculate the income tax art 21 payable by multiplying taxable income with

income tax rate

The calculation of income tax. art 21 for permanent and non-permanent

employees is quite different. Steps in calculating income tax art.21 for non-

permanent employee are:

1. Set the wage received daily or monthly

2. If wage received monthly, then do as procedure for permanent employee



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3. If wage received daily above IDR 150,000, deduct the amount with NTI per

day and multiple with tax rate. If no, then income tax art.21 will be imposed if

wage received above NTI, by deducting the amount with NTI and multiple it

with tax rate.

Income tax layer for personal taxpayer are stated below:

Figure 2.2

Taxable Income Layer

Taxable Income Layer Progressive Tax Rate

Above IDR 50,000,000 5%

Above IDR50,000,000 up to IDR 250,000,000 15%

Above IDR 250,000,000 up to IDR 500,000,000 25%

Above IDR 500,000,000 30%

Source: Article 17 par.(1)a The Fourth Amendment to the Law Number 7

Year1983 Regarding Income Tax (Law Number 36/2008)

2.1.3 Tax Collection System

Erly Suandi (2010:130) states “in general, there are three types of tax

collection systems; official assessment system, self assessment system, and

withholding system”.



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2.1.3.1 Official Assessment System

Official assessment system is tax collection method where the personnel’s

tax payable is calculated and set by fescues. In this system, taxpayer is inactive to

consider his/her tax payable. Tax payable occurs if the amount of tax payable

already set by fescues.

2.1.3.2 Self Assessment System

Self-assessment system is tax collection method which gives the right, trust,

and responsibility to the tax payer to calculate, collect, and report the taxable

income in accordance to tax regulation (Zain, 2007:113).

2.1.3.3 Withholding System

Withholding system means that tax collection is accomplished by the third

party. Withhold is used if the obligation to withhold the tax is on the party who

pay the salary, for example is income tax art. 21. On the other hands, collecting

where the obligation to collect is on the party who receive the payment, for

example is value-added tax (VAT).

This system also prevents tax evasion since collecting or withholding tax

literally does their job without considering who is withheld or collected, except

the criteria which exempted from the GPT.

There are three applicable methods of withholding income tax art.21, each is

described on the next page:



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a. Net Method

Net method is a method in which the company as job provider bears

employees’ tax (Bwoga: 2007). Hence, by this method, the salary received by

employee is not deducted by income tax art.21 should be paid. The payment

entries by net method are stated on the next page:

Salary expenses xxx

Art.21 Expense yyy*

Art.21 Liability yyy

Cash / Bank xxx

*Positive Fiscal Correction

b. Gross Method

In gross method, the company as job provider doesn’t withhold income tax

art.21. In this method, the employee himself who is bears income tax art.21 owed

(Bwoga: 2007).. The payment entries for gross method is:

Salary Expense xxx

Art.21 Liability aaa

Cash / Bank bbb

c. Gross-up Method

Gross-up method is one of the applicable methods for income tax art.21. In

this method, income tax art.21 held by company, but it is given in form of tax

allowance which the amount is equal to income tax art.21 bear by employees

(Bwoga: 2007). The calculation of gross-up method is stated on the next page:



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Figure 2.3

Gross Up Calculation

Salary T

Tax Allowance 5000

Gross Salary T+5000

Deduction:

Profession Cost xxx

Pension Fund xxx

Work Insurance xxx

Net Salary yyy

NTI yyy

Taxable Income yyy

Tax art. 21 owed 5000

Source: Bwoga, Aditya T. Handoko. 2007. Perhitungan PPh 21. (Online),

http://www.ortax.org, Accessed December 2nd

2011)

Entries applied by the company if for gross-up method is applied are stated

below:

Salary Expense xxx

Tax Allowance yyy

Art.21 Liability yyy

Cash / Bank xxx



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http://www.ortax.org/ortax/?mod=issue&page=show&id=16&q=&hlm=4

The formula of tax allowance for gross-up method is stated below:

Figure 2.4

Tax Allowance Formula for Gross-Up Method

Taxable Income (IDR) Formula

1-47,500,000 TI x

5

5

47,500,000-217,500,000 (TI 47,500,000) x

15

5

217,500,000-405,000,000 (TI 217,500,000) x

25

75 32,500,000

Above 405,000,000 (TI 405,000,000) x

30

70

Source: Bwoga, Aditya T. Handoko. 2007. Perhitungan PPh 21. (Online),

http://www.ortax.org, Accessed December 2nd

2011)

There are four layers of income tax imposition for calculating tax

allowances provided by the company if gross-up method is applied. The first is if

taxable income (gross salary added with allowances, premium, and deducted by

profession cost and others payment such as pension payment and old days

allowance paid by the employee) range is from IDR 1 up to IDR 47,500,000 a

year, the formula to calculate the tax allowance is taxable income multiplied by

five per ninety five. This gross-up formula is not progressive rate, it means the

taxable income is just multiplied by the formula for each range, unlike taxable

income layer for calculating income tax art.21 which have to move from one layer

to higher layer if the income is still remains. The evaluation of net method, gross

method, and gross-up method are stated on the next page:



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Figure 2.5

Evaluation of Net, Gross, and Gross-Up Method of Art.21

Detail Net Method Gross Method Gross-Up Method

Salary a)

IDR 60,000,000 IDR 60,000,000 IDR 60,000,000

Tax Allowance b)

0 0 1,837,895

Less:

Profession Cost c)

(4,200,000) (4,200,000) (4,200,000)

Life Insurance d)

(2,400,000) (2,400,000) (2,400,000)

Net Salary IDR 53,400,000 IDR 53,400,000 IDR 55,237,895

NTIe)

(18,480,000) (18,480,000) (18,480,000)

TI IDR 34,920,000 IDR 34,920,000 IDR 36,757,895

IT Payable:

5% x TI IDR 1,746,000 IDR 1,746,000 IDR 1,837,895

Status Non-Deductible

Expense

Employees’ Expense Deductible Expense

Income Received IDR 60,000,000 IDR 58,254,000 IDR 60,000,000

Per Month IDR 5,000,000 IDR 4,854,500 IDR 5,000,000

Source: Modification through Zain, Mohammad. 2007. Manajemen

Perpajakan.3rd

Edition

a) IDR 5,000,000 x 12

b) IDR x 5

5

c) IDR 350,000 x 12

d) IDR 200,000 x 12



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Entries occured :

1) Net method:

Salary expenses IDR 5,000,000

Art.21 Expense *145,500

Art.21 Liability IDR 145,500

Cash / Bank 5,000,000

2) Gross Method

Salary Expense IDR 5,000,000


Cash / Bank 4,854,500

3) Gross-Up Method

Salary Expense IDR 5,000,000

Tax Allowance 155,789*


Cash / Bank 5,000,000

*IDR 1,869,474/12

The evaluations of three applicable withholding methods are state below:



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Figure 2.6

Evaluation of Comprehensive Income for Each Art.21 Disbursement Method

Description Net Method Gross Method Gross-Up Method

Operating Income IDR 100,000,000 IDR 100,000,000 IDR 100,000,000

Less:

Op. & Adm. Expenses (1,000,000) (1,000,000) (1,000,000)

Salary Expense (5,000,000) (4,854,500) (5,000,000)

Tax Allowance 0 0 (155,789)

Net Income IDR 94,000,000 IDR 94,145,500 IDR 93,844,210

Income Tax 25% IDR 23,500,000 IDR 23,536,375 IDR 23,461,052

Tax Saving

(Compare to net method)

-

(IDR 36,3750) IDR 38,948

Source: Modification through Zain, Mohammad. 2007. Manajemen Perpajakan.

3rd

Edition

From the calculation and evaluation of three applicable methods, gross-up

method is most advantageous for both employee and company. From the

company’s side, it creates lower income tax which generates high tax saving.

From the employee’s side, it enhance employee’s affluent by giving them tax

allowance, thus they are less burdened by tax.



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2.1.3.3.1 Withholder of Income Tax Art. 21

The withholder of income tax art.21 is the party who pay the cash relate to

job or service rendered by the receiver. In amendment no.28 year of 2008 art. 21

(1) explained further in the DGT’s decision no.KEP-545/PJ/2000 art. 2 (1) party

who compel to accomplish the collection, withhold, and report art.21 is follow:

a. Job providers, consist of individual of entity

b. Government treasurer

c. Pension funds, such as Social Security Workers (Social Security), PT Taspen,

PT ASABRI

d. Companies and permanent establishment

e. Foundations, institutions, associations, clubs, mass organizations, social

organizations, political and other organizations and international

organizations that have been determined based on the Decree of the Minister

of Finance

f. The steering committee

2.1.4 Additional Laws Related to Income Tax Art. 21

Underlying laws related to the accomplishment of tax art. 21 issued by

government in form of amendments, government regulation, either finance

minister’s decision to the technical calculation accomplishment regulated on the

DJP’s decision either in its circular letter are stated below:



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1. Law number 6 years 1983 as changed into amendment no. 28 year of 2008

regarding taxation general provision and procedure.

2. The Fourth Amendment to the Law Number 7 Year 1983 Regarding Income

Tax (Law Number 36/2008)

3. Explanation of The Fourth Amendment to the Law Number 7 Year 1983

Regarding Income Tax (Law Number 36/2008).

4. PER-31/PJ/2009 of the withholding, collecting, and reporting procedure

income tax article 21/26 related to job, service, and personal activity

5. DGT regulation PER-57/PJ/2009 of the change in decision of DGT no: PER-

31/PJ/2009 of the technical procedure withholding, collecting, and reporting

procedure income tax article 21/26 related to job, service, and personal

activity

2.1.5 Tax Planning

Erly Suandy (200 :6) states term of tax planning as “the first step in tax

management, consist of collecting and analyzing tax regulation by purpose in

taking actions that could be done for tax saving”. Another term of tax planning

comes from Zain (2007:67), who stated tax planning is a structured action related

to consequence of the tax. The goal is how those controls could generate efficient

amount of tax which will be transferred to the government, with what we called

tax avoidance not tax evasion, which is an illegal act in tax boundaries. Though

those sound almost the same as criminal acts, but it’s clearly different between

one to another. Tax avoidance is a legal act which still in tax boundaries,

meanwhile tax evasion is truly out from the allowed act in tax boundaries.



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Tjahjono & Husein (2005:447) also state advantage that could be generates

from careful tax planning are stated as follow:

1. Cash disbursement saving. Tax as subtrahend element of income, becomes

encumber bear by enterprise. By minimizing tax, cash disbursement to pay

tax can be allocated to other company’s necessities.

2. Managing cash flow. By well-planned tax planning, we can estimate our

cash needed to pay tax and decide when we have to pay therefore company

could arrange more precise budget.

Certain things become motivation of tax payer to establish tax planning, but

it all derived from three of tax element:

1. Tax policy, is an alternative from various objective aim to accomplish in

taxation system

2. Tax law, is a guidance or regulation that must be obeyed by tax payer in form

of government’s regulation, president’s regulation, minister of finance’s

regulation, and director general of tax.

3. Tax administration, is a tax payer’s obligation to register to get tax id and tax

id for taxable entrepreneur and obligate to perform bookkeeping and/or

recording, calculate, deposit and convey tax return besides collect and

withhold tax



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Several measurements commonly used in measuring compliance of tax

payer, such as:

a. Tax saving; is an effort done by tax payer in avoiding paying tax by not

buying or consuming goods imposed by value-added tax (VAT) and reduce

working hours to minimize income

b. Tax avoidance; is a type of effort by not to take an action that probably

imposed by tax or effort by legally manipulate tax payer’s income which still

in scope of tax regulation.

c. Tax evasion; is a type of effort done by tax payer to avoid tax with illegal

action by hiding the true condition of tax subject.

Erly Suandi (2009:9) stated that certain thing must be considered in tax planning:

1. Tax planning must in the scope of tax regulation. If it is forced to violate

taxation law, it become risk for tax payer and might endanger tax planning

itself.

2. Make sense in business, since tax planning is inseparable part from global

strategy both in long term and short term. Thus, irrelevant tax planning

will devastate the planning itself.

3. Sufficient supporting evidence, such as invoice, agreement, and

accounting treatments.



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2.1.5.1 Tax Planning Framework

Main goal of tax planning is to minimize tax payable and generate optimal

tax saving. By using tax planning formula, we can minimize taxable income

which imposed by tax tariff. The general formulation is stated on the next page:

Figure 2.2

General Framework of Tax Planning

A Income as a whole

B - Income exception

C = Gross Income

D - Fiscal Expenses

E = Net Income

F - Loss Compensation

G = Taxable Income

H X Tax Tariff

I = Tax Payable

J - Tax Credit

K = Overpaid / Underpaid

L (A-D-K) After-tax income

Source: www.klinikpajak.com,(Online), (Accessed December 2nd

2011)



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http://www.klinikpajak.com/

2.1.5.2 Tax Management

In theory, tax planning is part of tax management. Erly Suandi (2009:6)

states “ in common, tax management is a facility to accomplish appropriate tax

compulsion by minimizing the amount to generate desired return”. To do so, two

certain conditions must be surpassing by applicant state as following:

1. Understand the Existing Regulations

By learning tax regulations, tax payer will obtain opportunities and loopholes

of regulations that could be applied to trim down tax compulsion.

2. Perform Appropriate Bookkeeping

Bookkeeping is one of the most important requirements in serving financial

information and become the first consideration in calculating tax payable of a

company.

Conclusion can be inferred from section above is roles of tax management

are stated as following:

1. Tax Planning

Is the first step in tax management, consist of collecting and analyzing tax

regulation by purpose in taking actions that could be done for tax saving.

2. Tax Implementation

Is the realization of tax compulsion both in formal and material. It must be assured

that the implementation complies with existing tax regulations and not disobey the

rules.



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3. Tax Control

Has intention to guarantee tax compulsion whether it has been done as designed

and fulfill both formal and material requirements.

2.1.5.3 Implementation of Tax Planning in Enterprise

Several actions that could be taken to reduce enterprise’s tax payable are state

as following:

1. Choose the Form of Business

This step is important to predict tax burden and non-tax factor should be paid by

enterprise

2. Income Separation

Enterprise can establish corporate restructuring by creating several group of

company (example as parent and subsidiary company)

3. Corporate Restructuring

It’s essential if some companies earn profit while loss occurring in one of

them, corporate restructuring by integration could reduce profit which will leads

to lower income tax payable.

4. Providing Allowance in form of Money Instead of Fringe of Benefit

Income tax regulation stated that provide employees in form of fringe

benefit is not as deductible expenses from gross profit. But in making tax strategy,

enterprise could control allowances by transforming fringe of benefit to money.



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5. Provide Tax Allowance

Tax saving efforts could also be done by giving tax allowance to employees,

which will raise the operating expense and impact Company’s taxable income

directly.

2.2 Systems, Data and Information

Organizations depend on information systems to stay competitive.

Information is just as much a resource as plant and equipment. Productivity,

which is crucial to staying competitive, can be increased through better

information system. Romney (2009:26) states “a system is a set of two or more

interrelated components that interact to achieve a goal”. Another definition of

system comes from Bodnar (2010:1), who states “a system is a collection of

resources related such that certain objectives can be achieved”.

Systems are almost always composed for smaller subsystems, each

performing a specific function important to and supportive of the larger system of

which it is a part. For instance, the college of business is s system composed of

various departments, each of which is a subsystem. Yet the college itself is a

subsystem of the university.

Data are facts that are collected, recorded, stored and processed by an

information system (Romney, 2009:27). Data usually represent observations or

measurements of business activities that are of importance to information system

users. Several kinds of data need to be collected in businesses, such as:



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1. Facts about the activities that take place

2. The resources affected by the activities

3. The people who participate in the activity

For instance, data need to be collected about a sales event. (e.g., the date of

the sales, total amount), the resource being sold (e.g., the identity of goods and

services, the quantity old and unit price), and the people who participated in the

sale (e.g., the identity of the customer and the salesperson.

Information is a data that have been organized and processed to provide

meaning to a user (Romney, 2009:27). User typically need information to make

decisions or to improve the decision making process. As a general rule, user can

make better decisions as the quality and quantity of information increase.

2.2.1 Accounting Information System

Bodnar (2010:1) states “an accounting information system (AIS) is a

collection of resources, such as people and equipment, designed to transform

financial and other data to information”. This information is communicated to a

wide variety of decision makers. Accounting information systems perform this

transformation whether they are essentially manual systems or thoroughly

computerized. Romney (2009:28) states there are six components of AIS:

1. The people who operate the system and perform various function

2. The procedures and instructions, both manual and automated involved in

collecting, processing, and storing data about the organization’s activities

3. The data about the organization and its business process

4. The software used to process the organization’s data



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5. The information technology infrastructure, including computers, peripheral

devices, and network communications devices used to collect, store, process,

and transmit data and information

6. The internal controls and security measures that safeguard the data in the AIS

Together, these six components enable an AIS to fulfill three important

business functions:

1. Collect and store data about organizational activities, resources, and

personnel.

2. Transform data into information that is useful for making decisions so

management can plan, execute, control, and evaluate activities, resources, and

personnel.

3. Provide adequate controls to safeguard the organization’s assets, including its

data, to ensure that the assets and data are available when needed and the data

are accurate and reliable.

2.2.2 Data Flow Diagram (DFD)

Laudon & Laudon (2010:523) states “data flow diagram as the primary

tool for representing a system components processes and the flow of data between

them”. The data flow diagram offers logical graphic model of information flow,

partitioning a system into modules that shows manageable levels of detail. It

rigorously specifies the processes or transformation that occur within each module

and the interfaces that exist between them.



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2.2.3 Flowchart

A flowchart is an analytical technique used to describe some aspects of an

information system in a clear, concise, and logical manner (Romney, 2009:92).

Flowchart uses a standard set of symbols to describe pictorially the transaction

processing procedures a company uses and the flow of data through a system.

Flowcharting symbols can be divided into the following four categories:

1. Input/output symbols represent devices or media that provide input to or

record output from processing operation.

2. Processing symbols either show what type or device used to store data that

system is not currently using.

3. Storage symbol represent the device used to store data that the system is not

currently using.

4. Flow and miscellaneous symbols indicate the flow of data and goods. They

also represent such operations as where flowcharts begin or end, where

decisions are made, and when to add explanatory notes to flowcharts. Figure

of flow and miscellaneous symbol is stated on the next page:

2.2.4 Payroll and Payroll System

Payroll is the financial record of employees’ salaries, wages, bonuses, net

pay, and deductions (E-conomic UK, 2011). Payroll system is a system which

organizes those activities. Payroll processing is extremely complex. In a large

organization it is one of the most complex procedures in operation. All levels of

government impose payroll taxes of one or sort another; regulations and rates are

changed constantly, with the result that a payroll system usually requires constant



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modification. Payroll processing is one area in which the law imposes not only a

fine but a jail sentence for willful negligence in maintaining adequate records.

Three critical areas of payroll system are:

a. Personnel

Bodnar (2010:294) argues” the personnel (employment) office is

responsible for placing people on the company’s payroll, specifying rates of pay,

and authorizing all deductions from pay”. All changes, such as adding or deleting

employees changing pay rates, or changing levels of deductions from pay must be

authorized by the personnel office. The personnel function is distinct from

timekeeping and from the payroll preparation function.

b. Timekeeping

Bodnar (2010:294) argues “the timekeeping function is responsible for the

preparation and control of time reports and job-time tickets”. An hourly employee

typically clocks on and off the job. At the end of a pay period, the employee’s

time card (or time report) indicates that the amount of time the employee was on

the job and the time of which he or she expects to receive pay. Timekeeping is

responsible for collecting and maintaining time cards or time reports, and

reconciling these data with job time summary reports. Salaried employees

typically do not clock on and off the job in the same manner as hourly employees.

If no accounting for time is required a supervisor’s approval usually is required to

initiate payroll processing.



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c. Payroll

The term 'payroll' encompasses every employee of a company who receives

a regular wage or other compensation (Lindsay, 2011). Some employees may be

paid a steady salary while others are paid for hours worked or the number of items

produced. All of these different payment methods are calculated by

a payroll specialist and the appropriate paychecks are issued. Companies often use

objective measuring tools such as timecards or timesheets completed by

supervisors to determine the total amount of payroll due each pay period. Note

that preparing payroll is independent of the preparation of the input data on which

pay is based-the time reports and personnel data. Personnel data are received from

the personnel office. Time reports are received from timekeeping. The payroll

register details the computation of net pay (gross pay less deduction from pay).

Paychecks are sent to cash disbursement for signature, review, and distribution. A

copy of the payroll register is sent to accounts payable to initiate the recording of

a voucher for the payroll.

2.2.5 System Development

System development is the process of modifying or replacing a portion or

all of an information system (Bodnar, 2010:352). This process requires a

substantial commitment of time and resources and is an ongoing activity in many

organizations. System development normally is undertaken by a project team

composed of system analysts, programmers, accountants, and other people in the

organization who are knowledgeable about or affected by the project. Every



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http://www.wisegeek.com/what-is-a-salary.htm

http://www.wisegeek.com/what-is-a-pay-period.htm

system development project goes through essentially the same systems

development life cycle: planning and analysis, design, and implementation.

2.2.5.1 System Planning

System planning involves identifying subsystem within the information

system that needs special attention for development (Bodnar, 2010:353). The

objective is to identify problem areas that need to be dealt with either immediately

or sometime in the future.

2.2.5.2 System Analysis

System analyst describes what a system should do to meet information

requirements (Laudon, 2010:517). System analyst begins after systems system

planning has identified subsystems for development. The primary objectives of

system analyst are:

1. Gain an understanding of the existing system (if one exist)

2. Identify and understand problems

3. Express identified problems in terms information needs and system

requirements

4. Clearly identify subsystems to be given highest priority

Bodnar (2010:356) states there are four phases in system analysis state as

follow:

1. Survey the present system

The system survey has four objectives:



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a. Gain a fundamental understanding of the operational aspects of the

system

b. Establish a working relationship with the users of the system

c. Collect important data that are useful in developing the system design

d. Identify specific problems that require focus in terms of subsequent

design efforts

2. Identify information needs

The second major phase of system analysis involves identifying information

requirements for managerial decision making. In identifying information needs,

the analyst studies specific decisions made by managers in terms of the

information inputs, usually called information needs analysis.

3. Identify system requirements

The third phase involves specifying systems requirements. Such

requirements can be specified in terms of inputs and outputs. The input

requirements for a given subsystem specify the specific needs that must be met in

order for that subsystem to achieve its objectives.

4. System analysis report

The final output of the system analysis project is a report. This report is

extremely important because it often serves as a basis for further decision making

on the part of top management. In addition, this report organizes and documents

all the findings of the three phases of the systems analysis project. System

analysis report is presented to top management.



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2.2.5.3 System Design

System design is an orderly process that begins at very general level with

the setting of objectives for a particular system (Bodnar,2010:366). The major

steps in system design include evaluating design alternatives, preparing design

specifications, and submitting a completed systems design reports.

At some point, the decision must be made as to whether the computer

software is to be built from scratch or purchased. Although this seems to be a

design decision, it should be made at the end of analysis phase. It is economically

more feasible for many businesses, especially smaller one, to buy rather than build

software. Purchase software packages have several advantages:

1. They are cheaper. The cost of development is carried by many purchasers

rather than just the creator.

2. They are already debugged. If several other organizations have been using

the package for some months, it is reasonably safe to assume that most of

the bugs have been found and exterminated.

3. The company can try product before investing a great deal of money. With

in-house software, it is possible to put months of development time into a

program only to discover that it does not produce the desired results when

it is done.

However, the main disadvantage to canned software packages (i.e.,

purchased software package) is that they rarely exact meets a company’s needs. It

may be necessary to modify software (which can be expensive, if not impossible)

or to modify the company’s procedures to match what the package requires.



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2.2.5.4 System Implementation

This is the last step of system development. After the system is created or

purchased (if the company decided to buy software package), the company

implements the system, creates feedback for the system and improvement (if any).

2.2.6 Software

Computer software consists of the detailed, preprogrammed instruction that

control and coordinate the computer hardware components in an information

system (Laudon, 2010:51). In other words, software is a conceptual entity which

is a set of computer programs, procedures, and associated documentation

concerned with the operation of a data processing system.

Program software performs the function of the program it implements,

either by directly providing instructions to the computer hardware or by serving as

input to another piece of software. The term was coined to contrast to the old

term hardware (meaning physical devices). In contrast to hardware, software is

intangible, meaning it "cannot be touched" Software is also sometimes used in a

more narrow sense, meaning application software only. Sometimes the term

includes data that has not traditionally been associated with computers, such as

film, tapes, and records.

One sample of software is income tax art. 21 software is software created

to perform obligations of income tax. art.21. The main purpose of this software is

to make the company easier in calculating income tax art.21.



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http://en.wikipedia.org/wiki/Software

http://en.wikipedia.org/wiki/Function_(engineering)

http://en.wikipedia.org/wiki/Computer_program

http://en.wikipedia.org/wiki/Instruction_(computer_science)

http://en.wikipedia.org/wiki/Terminology

http://en.wikipedia.org/wiki/Hardware

http://en.wikipedia.org/wiki/Application_software

2.3 Previous Research

Preceding research of Junitasari titled “Implementasi Perencanaan Pajak Atas

Metode Perhitungan Pajak Penghasilan Pasal 21 Di PT X Surabaya”. The case

described the preceding tax planning done by PT X was ineffective. Suggestion to

change the method of income tax art.21 from net method to gross-up method is

already done. Arise from the problems, the understanding of the availability

regulation in any kinds of form and the right and careful calculation is

recommended to establish successful tax planning. The company would be better

to implement gross-up method since it can create a win-win between company

and employees.

Similarities are occurred in the case, which is ineffective tax planning and the

problem solving, which gross-up method is recommended for better tax planning.

The diverse problems are the preceding research only emphasize in tax planning

for permanent employees, evaluation to the existing method (gross method) and

the recommended one (gross-up method), and evaluation of the implementation of

recommended withholding method through yearly comprehensive income. This

research tries to creates tax planning for both permanent and non permanent

employees, make evaluation of each permitted withholding method of income tax

art.21 and make evaluation from month to month of tax saving that could be

generated and the influence through yearly comprehensive income.

Another researches by Asriyani for “Sistem Penggajian Karyawan Pada

Perusahaan Daerah Air Minum (PDAM) Kabupaten Kudus” and Rachman

Subandhi for Analisa Sistem Informasi Akuntansi Penggajian pada PT



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Pembangkitan Jawa Bali di Surabaya. Both problems examined were the

effectiveness of payroll system in each company. Elements related to payroll

system also examined. Research result shown several deficiencies in the system,

especially for separation of duties and authorization function. Upgrading payroll

system was recommended for better system. Summary from the research is

payroll systems are the company should be strictly supervised and treated to

prevent misuse and fraud. All relevant sections must be able to perform the duties

in accordance with its function, so that payroll system can run smoothly.

Several similarities arise based on the existing problem. The problems

occurred are the same, and reference for system improvement to creates better

internal control and prevents fraud is the solution. Yet the dissimilarities are the

previous research only focus to the company’s internal control, also companies of

prior problems already have its own payroll system. The research here is not only

focus to the internal control and creates proper payroll system, but also a good tax

planning that will occurs if the company’s payroll system is performed well.



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CHAPTER 3

RESEARCH METHODOLOGY

3.1 Research Approach

This research is using qualitative approach. Denzin K. and others (2005)

state “qualitative research is a method of inquiry employed in many different

academic disciplines, traditionally in the social sciences, but also in market and

further contexts”.

The research type used is case study research. Yin (2008:23) defines “the

case study research method as an empirical inquiry that investigates a

contemporary phenomenon within its real-life context; when the boundaries

between phenomenon and context are not clearly evident; and in multiple sources

of evidence are used”.

3.2 Research Scope

The research scope of this research is the payroll system and income tax

art.21 withholding and collecting procedure. Several laws which included in this

scope such as:

1. Amendment number 6 years 1983 as changed into amendment no.28 year of

2008 regarding general taxation provision and procedure.

2. Amendment number 36 year of 2008 as the fourth amendment to the law

number 7 year 1983 regarding income tax

3. DGT regulation PER-57/PJ/2009 of the change in decision of PER-31/PJ/2009

of the technical procedure withholding, collecting, and reporting income tax

art. 21/26 related to job, service, and personal activity.



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http://en.wikipedia.org/wiki/Social_sciences

3.3 Data Type and Source

The type and resource of the data in this research including qualitative and

quantitative data, with data source stated as following:

a. Primary data; is data obtained in which the purpose of issuance is intended

for this research only. A primary data obtain from this research is

interview list.

b. Secondary data; is a data in which the purpose of issuance is not intended

for this research. Secondary data obtained from this research are company

SS statement of financial position, overwork recapitulation, salary

recapitulation, and payroll policy.

3.4 Data Collecting Procedure

As equal with the research procedure in general, in short, the data collecting

procedure of this research are:

1. Preliminary Survey

Preliminary survey is performed to get company’s general view and its

current condition. General information of Company SS such as general business,

policy, working procedure and condition are obtained during the preliminary

survey of research.

2. Literature Review

Literature review that support this research is collected the data which

derived from amendment of taxation, tax planning presentation, tax law book of

Suandi (2010), tax planning book by Suandi (2009), tax management by Zain



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(2007), accounting information system book by Bodnar (2010) and management

information system book by Laudon & Laudon (2010), Romney and Steinbart

(2009), Hall (2008).

3. Field Research

Trochim B. (1999) states “field research can be considered either as a broad

approach to qualitative research or a method of gathering qualitative data”. The

essential idea is that the researcher goes “into the field” to observe the

phenomenon in its natural state or in situ. The research carried out through:

a. Observation

Langley (1988) states “observation involves looking and listening very

carefully”. Payroll system and implementation of income tax art.21 are observed

in this research. This research also observes the procedure and implementation of

payroll policy performed by employees of Company SS.

b. Interview

An interview is a conversation between two people (the interviewer and the

interviewee) where questions are asked by the interviewer to obtain information

from the interviewee. The qualitative research interview seeks to describe and the

meanings of central themes in the life world of the subjects. The main task in

interviewing is to understand the meaning of what the interviewees say. In this

research, the interview conducted to the Director, Accountant, Permanent

Employee and Non-Permanent Employee to obtain important information about

the implementation of income tax art.21, existing payroll system and policy.



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http://en.wikipedia.org/wiki/Question

c. Documentation

Documentation performed during the research are collecting payroll policy

for both permanent and non-permanent employee, several adequate documents

that support this research such company’s tax return in 2010, tax collection letter.

3.5 Analysis Technique

Steps in analyze the research are:

1. Recommend strategies of tax planning for income tax art.21 for permanent

and non permanent employees. Evaluate the best method of withholding

income tax art.21 by comparing the three withholding method of income tax

art.21. Apply fringe benefit as recommendation for non permanent employees

and compare the result.

2. Evaluate payroll policy of Company SS until the collection of income tax

article 21. Classify the weak point of existing policy for further analysis and

improvement.

3. Create system recommendation for company’s payroll system which more

adequate to a good internal control and good implementation of tax planning

of income tax art.21

4. Summarize the results for both recommendation payroll system, policy and

tax planning of income tax art.21 for Company SS, and propose for

development of payroll system and tax strategy to maximize company’s

efficiency and effectiveness.



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CHAPTER IV

RESEARCH RESULT AND SOLUTION

4.1 General View of Research Subject

4.1.1 History of Company SS

Company SS is a construction service and supplier company which run its

business in many project in Jakarta and Tangerang. Company SS established at

September 2007. Company SS is defined as service and general trading business.

Vision of Company SS is to become a national construction and supplier service

in Indonesia. Several products and services offered by Company SS so far are

stated follow:

1. Construction services consist of waste and clean water installation,

mechanical and electricity services, sprinkle and water features

installation.

2. Technical planning which consist of civil construction, waste and clean

water construction, electricity and mechanical construction, sprinkle and

water fountain construction.

3. Electricity and mechanical supplies, office supplies, chemical substances,

and survey appliances.

4. Maintenance service which consist of mechanical and electricity

maintenance and repairing.



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4.1.2 Organizational Structure of Company SS

Each structure in organization has clear duty and authority which will be

explained on the next page:

a. Director

The directors are responsible for the management of the company. While

their powers can be restricted by the company's articles they can, in most cases do

anything that the company can do. With these powers, come responsibilities.

Since the directors can act as and for the company, they must ensure that the

company does everything that it is obliged to do by law and that the decisions

they make are in the best interests of the company. Directors are bound by certain

duties such as the duty to act within the scope of their authority and to exercise

due care in performance of their corporate tasks.

b. Commissioner

The commissioner has responsibility to supervise and give advice to the

director. In doing his responsibility, director is having big authority; hence he

should be supervised by commissioner to assure if the capital is maintained.

c. Accountant

Record all cash-out and cash-in transaction occurred, and make reports for

internal purpose. Accountant also responsible for recording overtime hours of

employees and manage the overtime record. Accountant also responsible for

taxation activities, such as determine the amount of income tax art.21, corporate

tax, deposit tax payable, etc.



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d. Construction Department

Responsible in serving services in construction section, such as waste and

clean water installation, sprinkler installation, water feature installation, etc. Head

of construction department is responsible in assuring the service running well and

based on the agreement.

e. Maintenance and Procurement Department

Responsible in make procurement of goods such as mechanical and

electricity supplies, chemical supplies, etc. It’s also responsible in providing

maintenance service for electricity and mechanical installation. Head of

maintenance and procurement department is responsible in assuring the service

and procurement of supplies running well and based on the agreement.

Figure 4.1

Organizational Structure of Company SS

Director Comissioner

AccountantConstruction

Department

Maintenance

and

Procurement

Department

Mechanical,

electricity, and

civil employees

Mechanical,

electricity, and

procurement

staff

Source: Internal Resource of Company SS



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Director

Accountant Construction Department

Mechanical, Electricity and Civil Employee

Maintenance and Procurement Department

Mechanical, electricity and procurement staff

Commisioner

4.2 Research Result

4.2.1 Existing Procedure of Income Tax Art.21

In determining monthly income tax art.21 for its workers, Company SS is

using gross method; therefore Company SS will bear employees’ income tax

art.21. Profession cost for each employee whether permanent or non permanent

employees are set by the director.

The treatments for the calculation of income tax art.21 for permanent and

non-permanent employees are quite different. While for permanent employees the

amount of tax art.21 determined every month, the amount of income tax art.21 for

permanent employees is slightly different. Wages are imposed by income tax

art.21 after it excesses the amount of monthly non-taxable income. So, the

accountant keeps maintaining income tax art.21 for non-permanent employees

from day to day.

For permanent employee, the recapitulation of calculation through salary

with income tax art.21should be paid by Company SS in 2010 as a whole and

December 2010 to represent others month in 2010 are presented. Meanwhile, for

non-permanent employees, the recapitulation of calculation through wage and

income tax art.21 should be paid by the company in 2010 and April 2010 are

presented on the next page after permanent employees’ list.

To analyze method applied by the company and the effect through

company’s comprehensive income, Figure 5.1 up to Figure 5.6 on attachment

illustrates the existing condition.



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Based on the calculation, the impact in comprehensive income of Company SS in

2010 is stated below:

Figure 4.2

Comprehensive Income

Company SS

2010

(In Rupiahs)

Commercial Correction Fiscal

Gross Profit: 1,698,188,000 1,698,188,000

Less:

Operating Expense (476,210,000) - (476,210,000)

Administration Expense:

Salary and Wage Expense (993,640,000) - (993,640,000)

Vehicle Expense (10,100,000) - (10,100,000)

Depreciation Expense (2,927,090) - (2,927,090)

Accommodation Expense (20,652,000) - (20,652,000)

Income Tax Art. 21 Expense (16,235,000) 16,235,000 0

Other Adm. Expense (1,326,500) - (1,326,500)

Other Expense:

Bank Administration Expense (40,200) - (40,200)

Net Income Before Tax 177,057,210

193,292,210

Less: Corporate Tax 25% (44,264,302.5)

(48,323,052.5)

Net Income After Tax 132,792,907.5

144,969,157.5

Additional Information:

Gross Profit:

Fiscal

Correction

Income tax art.21 expense 16,235,000 Positive

Total Fiscal Correction 16,235,000

Source: Company’s Internal Data



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There are corrections/adjustments made in statement of comprehensive

income of Company SS, IDR 16,235,000 which treated as income tax art.21

expense is adjusted since the amount cannot be treated as expense in fiscal

statement of comprehensive income. The correction is positive fiscal correction,

which means that since the adjustment will increase the amount of net income.

Total correction done in 2010 is IDR 16,235,000. By using the rate as written in

art.17 par. 1 (b) income tax law, the corporate tax payable the Company SS

should pay are IDR 48,323,052.5, creating after tax income worth IDR

144,969,157.5 for fiscal financial statement. On the other hand, for commercial

purpose, Company SS should pay income tax IDR 44,264,302.5which reduce it’s

after tax income worth IDR 132,792,907.5.

4.2.2 Existing Company Policies Through Payroll

Company SS running its business in general trading and construction

service. Company SS creates policies that regulate procedures should be

performed while in work. So does with payroll, Company SS also creates policies

to it, to make easier in performing payroll procedures. Several policies through

payroll created by Company SS for both permanent and non permanent employees

are quite different, since the type is dissimilar, each has different treatment and

regulation regarding payroll. List of policies for each type of employment can be

seen on the next page:



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Figure 4.3

Company SS Policies through Payroll Procedure

List of Policies Permanent Employees Non-Permanent Employees

Total Employees 15 108

Payment Monthly, by director Daily, by director

Calculation of

Salary/Wage

Calculated Monthly, the amount

received probably different

Calculated Daily, the amount

received is the same

Attendance

Unrecorded, employees’ absenteeism

max. 2 days a month but no formal

regulation bounded

Unrecorded, employees should attend

work as long as the contract is going.

Salary/Wage Reduction N/A N/A

Source: Internal Data

4.2.3 Existing Payroll System

In Company SS, the payroll system performed manually, so there is no

computerized system. At the existing system, only the accountant and the director

who are directly responsible for the system. Procedures of payroll system for

permanent and non-permanent employee are somewhat different. Steps of payroll

system start from employee’s recruitment until the creation of financial report in

Company SS for permanent employee are stated below:

1. At start, the director approves employees’ recruitment and creates

employees’ personal data which will be kept by the director. Monthly salary

data and overwork are data which will be distributed to accountant.

2. Employees’ personal data consist of employees’ data such as name, ID,

address, job description, monthly salary, etc. Meanwhile, monthly salary



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data which is going to be distributed to accountant is a sheet of paper

consists of employees’ ID, monthly salary, list of allowances, and

profession cost. For overwork list, it is occurred at the end of month.

3. The next step is the director distributes the data of employees’ monthly

salary and overwork list to be determined and process further by the

accountant, to recognize the amount of salary expense and income tax art.21

expense should be paid by the company during a month.

4. The accountant then receives monthly salary data and overwork list from the

director. The accountant calculates employees’ salaries and income tax

art.21 manually. Then, she prepares and generates salary summary report for

current period.

5. After finish, she handed back the report with the monthly salary data and

overworked list to the director.

6. The director examines the report by matching the personal data, overwork

list, and monthly salary data with salary summary report. If the data is

wrong, the director asks the accountant to review the report.

7. The director withdraws the money at the Bank. Paychecks and withdrawal

slip are kept by the director. The director distributes both the approved

salary summary report and withdrawal slip to the accountant. The director

distributes paycheck to each employee.

8. Receive the approved report with the withdrawal slip, the accountant then

create financial report at the end of month



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The payroll procedures for non-permanent and permanent employee are

slightly different since the methods of payment are different. Procedures of

payroll system for non-permanent employees are:

1. At start, the director approves employees’ recruitment and creates

employees’ personal data and data of daily wage. Employees’ personal data

created and kept by the director consist of employees’ data main source,

such as name, address, etc. While daily wage data consists of daily wage

each employees and their list of marital status.

2. After creates daily wage data and personal data, the director withdraws the

money at the bank. The Director receives both paychecks and withdrawal

slip.

3. After go back from the bank, the director distributes both the daily wage

data and withdrawal slip to the accountant. The director also distributes

wage to each employee.

4. After receive withdrawal slip and daily wage data from the director the

accountant then determine and set the amount of wage and income tax art.21

for each employee. After done with the calculation, the accountant

journalize and posting the occurring transaction.

5. A statement of financial report and comprehensive income are generated.

Fiscal reconciliation is made afterward in company’s yearly tax return.

Based on the description above, the existing Context Diagram, Data Flow

Diagram and flowchart for both permanent and non-permanent employees of

Company SS figured on the next page:



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Personal data

Payroll

Process

Accountant

Director

Bank

Employees

Salary Summary Report

Overwork and Monthly Salary List

Withdrawal Slip


Salary

Withdrawal Slip

Withdrawal

Figure 4.4

Data Flow Diagram – Context Diagram of Existing Payroll Process For

Permanent Employees


Figure 4.5

Data Flow Diagram – Context Diagram of Existing Payroll Process For

Permanent Employees

Payroll

Process

Accountant

Director

Bank

Employees

Daily wage list

Wage report

Wage

Withdrawal Slip

Withdrawal

Withdrawal SlipWage Report




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Overwork and salary

list

Withdraw

al sheet

Figure 4.6

Data Flow Diagram of Existing System for Permanent Employee – Level 0

1.0

Recruitment and Input

Data

Accountant

Director

Employees

Personal data

Overwork and monthly

salary list

Personal data

2.0

Calculation of Income

Tax Art.21

Director

Approval

Salary Summary

Report

Accountant

Salary Summary

Report, income tax

art.21 listApproval

3.0

Paycheck Distribution

Accountant

Bank

Money and withdrawal

slip

Withdrawal sheet

Withdrawal slip

Director

Employees

Paycheck




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Director

Figure 4.7

Data Flow Diagram of Existing System for Non Permanent Employee – Level 0

1.0

Recruitment and Input

Data

Accountant

Employees

Personal data

Daily Wage list

Personal data

2.0

Withdrawal

Director

Money

Withdrawal

Bank

Money

Withdrawal Sheet

3.0

Paycheck Distribution

and Calculation of

Income Tax Art. 21

AccountantWithdrawal slip

Director

Employees

Wage

Withdrawal sheetIncome Tax Art.21 and

daily wage list


The existing flowchart system for both permanent and non-permanent

employees are illustrate on the next page:



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4.2.4 Research Result Description

Every business desires going concern. So does Company SS. To establish its

main goal, company requires enhancing its capability to survive in business

competition and enhance its business. To accomplish it, the company has to

improve its quality by the time. First consideration will be its human resource,

since it takes a great role in a company. Thus, employee prosperity becomes

consideration to enhance their effectiveness, and by allowance given, hopefully

employees could be more motivated, thereby will increase

company's performance. Besides human resource, company also has to improve

its’ capital resource; accounting system. By an integrated accounting system,

company can be more effective and efficient. For instance, with good accounting

system, company can avoid undesired condition such as fraud.

4.2.4.1 Research Result through Existing Withholding Method

The existing method of withholding method for income tax art.21, which is

gross method viewed unfavorable for Company SS, since the result of the method,

which is income tax art.21 expense treated as non-deductible expense in tax

regulation. Hence, the company is not only bear construction tax as final tax

which is non-deductible, but also income tax art.21 expense. As a result, the

income before tax in fiscal financial statement is greater than it should be, hence,

the company should pay higher corporate tax. This is really creates company

losses since tax planning performed by Company SS is ineffective.



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4.2.4.2 Research Result through Company Policies

Existing company policies regarding payroll are too effortless, no strict

regulations for payroll. Employees can freely act as they want. By poor policies,

company’s performance couldn’t be in maximum level. This caused by poor

policies which leads ineffective and inefficient work. Several deficiencies in

policies of Company SS created are stated below:

1. No Attendance List

Without attendance list, means no control over employees’ attendance.

Employees can attend work and go home as they want. The impact for the

company is an ineffective and inefficient performance of human resource; the

company gets loss since salary spent for them is not equal to their performance

and effort. The worst thing will happen if the company unable to enhance their

performance soon.

2. No Penalty and Clear Policy

There are no clear penalties for disobedient employees related to their

attendance, such as maximum absenteeism, warning letter, and firing the

employee. Employees can work as they want. Those things might impact

company’s effectiveness and efficiency. Assets misused, data theft, and money

loss are several misappropriate action by employees and could create significant

loss for company. To prevent such things, good and strict policies should be

made.



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3. No Salary Reduction

In Company SS, there’s no salary reduction if employees were absent to

work. It means that working employees will earn the same amount of salary

whether they attend for work or not. Company will disburse its money without

outcome. Hence, the company will suffer since ineffective performance made by

employees. The policy for this section hasn’t been made formally.

4.2.4.3 Research Result through Payroll System

Based on the analysis of existing flowcharts, several deficiencies can be

found, such as:

1. Manual Payroll Process

Manual payroll process means every procedure in Company SS payroll

processing is not performed by computer. Manual policy is not a deficiency

actually. But, considering the condition of Company SS which wants to perform

business expansion and want to enhance the performance of tax planning, manual

system is pointed as weakness. Deficiencies of manual process are complicated

bookkeeping and financial reporting, impractical, higher probability of occurrence

of fraud, misstatement, and data lost.

2. Segregation of Duties

Lack separations of duties are occurring in payroll system. Only director and

accountant are involved in this system. The interdependence between director and

employees are very high, moreover with non-permanent employees. There are no

personnel who responsible for placing people on the company’s payroll and



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authorizing all deductions from pay and payroll department to compute and

prepare the payroll. High probability of fraud might occur since lack of internal

control and segregation of duty. Note that preparing payroll is independent of the

preparation of the input data on which pay is based-the time reports and personnel

data. Role of accountant as the one who prepared and calculate the payroll amount

should be modified. Personnel department and timekeeper department should be

established to create better internal control through payroll system. Another

separation of duty should be improved to the role of director. Distribution of

salary should be performed by personnel.

3. No paycheck slip received by employee

No paycheck slip means that the employee has no payment proof received

by him. Employee doesn’t have proof if the salary received is less or more than it

should be, hence, he cannot employ his right. Paycheck is recommended for the

system improvement. For company’s sake, a copy of paycheck slip is needed.

4. No copy of essential data

Copies of data such as withdrawal slip are important to be kept by several

departments to rematch whether the data or the amount listed is match or not. In

this payroll system, only accountant who keeps the withdrawal slip. The

accountant can create fake report or slip easily. To prevent the embezzlement,

copies of slip or document are necessary.

Improvements for existing problem are improving existing payroll system

and tax planning of income tax art.21 establishment. Existing system and



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deficiencies will be explained and improved for further development. Tax

planning of income tax art.21 can runs smoothly with developed payroll system.

In tax planning section, improvement is done by evaluating between each

withholding method, and comparing tax saving for each method. Several

condition for both permanent and non-permanent employees also become

consideration to generate higher tax saving.

4.3 Research Solution

4.3.1 Recommendation through Procedure for Income Tax Art.21

Based on the research result, the existing withholding method, which is

gross method of Company SS doesn’t provide effective tax planning. These things

can be seen from the company’s statement of comprehensive income. Therefore,

recommendation through the changing from the existing method which is gross

method to the recommendation method, which is gross-up method, is proposed for

effective tax planning.

Gross-up method is the most advantageous one for the company, since by

the implementation of tax allowance for each employee, the company not only

could generate higher employees take home pay, but also lower corporate tax paid

by the company since tax allowance is treated as deductible expense in tax

regulation.

The calculations of gross up method and tax allowance for permanent

employee are stated on the attachment. From the calculation, employees’ take



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home pay in December and in 2010 as a whole is increasing. Comparing to

existing method which is IDR 554,440,000 in 2010, by gross-up method,

employees can receive higher take home pay, which is IDR 568,772,138 as a

whole.

At December, by gross method, employees only earned IDR 44,590,000.

Meanwhile, by gross-up method employees could earn up to IDR 45,703,684.

This sure can enhance employees’ prosperity by giving them tax allowance;

hence, employees aren’t burdened by income tax art.21 they should pay.

In minimizing income tax art.21 for non-permanent employees, it has

somewhat different treatment, since the payroll is doing daily, unlike the

permanent employees who are doing monthly. Hence, tax planning for non-

permanent employee is not only focuses on the method used by the company, but

emphasize in the fringe-benefit offered by the company.

As stated in the art.6 par.1 tax law no. 36 year 2010, fringe benefit treated

as deductible expense, except meal for employees as a whole. Therefore, by

providing meals facility, Company SS could lower daily wage rates from IDR

100,000 a day to IDR 80,000 (Three times meals valued IDR 20,000).

Company SS reduce employee’s wage for IDR 20,000 for meal facility.

However, the price of meal per day is IDR 15,000, means the Company should set

lower budget for meals facility provided compared to wage reduction . So, the

company not only could allocate deductible expense, but also saving in

company’s disbursement for daily wage expense. Company SS gets lower price



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since it buy for big quantities. The figure of recapitulation of meals expense can

be seen on below:

Figure 4.10

Recapitulation of Meals Expense for Non-Permanent Employee

2010

Meals/Day Contract Date Working Days Total Employees Total Meals Expense

IDR 15,000 Apr 3 – 24 10 79 IDR 11,850,000

IDR 15,000 Apr 7 – 26 20 29 IDR 8,700,000

IDR 15,000 Oct 22 – Nov 7 17 79 IDR 20,145,000

IDR 15,000 Nov 3 – 27 25 29 IDR 10,875,000

Total 72 108 IDR 51,570,000

Source: Researcher’s Calculation

The figure above explains about meals expense for each contract during

2010. There are four contracts during 2010. Each contract hired different amount

of employees. For instance, contract which held on April 7th

up to April 26th

,

which consist of 20 days, company SS hired 29 employees.

Since company SS should provide meals as long as the contract is going,

then the amount of meals provided by Company SS for those contracts is IDR

8,700,000. This amount derived by multiplying total working days, total

employees, and meals expense per day.

Meals facility given by employees also should be agreed by the employee.

The effect of the implementation toward gross-up method and fringe benefit for

non-permanent employees is stated on the attachments figure 5.7 up to 5..



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The effect in company’s comprehensive income by recommendation for

both permanent and non-permanent employees can be seen below:

Figure 4.11

Comprehensive Income After Income Tax Art.21 Recommendation

Company SS

2010

(In Rupiahs)

Commercial Correction Fiscal

Gross Profit 1,698,188,000 1,698,188,000

Less:

Operating Expense (476,210,000) - (476,210,000)

Administration Expense:

Salary and Wage Expense (920,132,138) - (920,132,138)

Tax Allowance (16,207,006) (16,207,006)

Vehicle Expense (10,100,000) - (10,100,000)

Depreciation Expense (2,927,090) - (2,927,090)

Meal Expense (51,570,000) (51,570,000)

Accommodation Expense (20,652,000) - (20,652,000)

Variable and Premium Expense (1,326,500) - (1,326,500)

Other Expense:

Bank Adm. Expense (40,200) - (40,200)

Net Income Before Tax 199,023,066

199,023,066

Less: Corporate Tax 25% (49,755,766.5)

(49,755,766.5)

Net Income After Tax 149,267,299.5

149,267,299.5


By implementing gross-up method for both permanent and non-permanent

employee, the amount of company’s net income before tax is increasing worth

IDR 1 ,023,066, so does its’ after-tax return for IDR 149,267,299.5. Even

though the corporate tax is increasing, company SS still earn greater return.



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From the illustration on the attachment, by implementing tax planning for

both permanent and non-permanent employees, Company SS could generates

income after tax higher than before. The contrast of tax saving of before and after

tax planning is stated below:

Figure 4.12

Evaluation Through After Tax Income, Take Home Pay and Disbursement

(In Rupiahs)

Description

Before Tax

Planning

After Tax

Planning

Difference

(After-Before)

Fiscal after tax income 144,969,157.5

149,267,299.5 4,298,142

Commercial after tax income 132,792,907.5 149,267,299.5 16,474,392

Employee’s take home pay

and benefit in kind

993,640,000 1,005,099,144 11,459,144

Cash disbursement through

payroll

993,640,000 987,909,144 5,730,000


From the evaluation above, Company SS probably has higher income for

both in fiscal and commercial after the implementation of tax planning. Before the

implementation of effective tax planning, Company SS has IDR 144,969,157.5 for

fiscal after tax income, but after the modification to the withholding system, the

fiscal after tax income is rise up to IDR 149,267,299.5, and creates tax saving

worth IDR 4,2 ,142. Meanwhile, for company’s commercial after tax income

which is derived from the difference between net income and corporate tax,



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Company SS could create tax saving for IDR 16,474,392from the difference of

before tax planning which is IDR 132,792,907.5 with after tax planning for IDR

149,267,299.5.

By implementing the benefit in kind for permanent employees in form of

meals and tax allowance for both permanent and non permanent employees, the

employees’ take home pay and prosperity is increasing from IDR 3,640,000 to

IDR 1,005,099,144, meanwhile cash disbursement for payroll expense (include

tax allowance and meals) the company should pay is decreasing from IDR

987,909,144. Even though after the implementation for tax planning Company SS

will pay more, such as tax allowance and meals, but still company SS could lower

its’ expense for IDR 5,730, 56. This does make sense since by the

implementation of tax planning, after tax income and employees’ prosperity are

go getter. The recommendation system has both higher fiscal and commercial

after tax income and take home pay. Commercial income is more essential for the

company since it draw the real condition of company’s condition of

comprehensive income.

4.3.2 Proposed Company Policies through Payroll

After review and describe weaknesses of company policy for payroll,

several recommendation for the policy are:



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Figure 4.13

Proposed Company Policy through Payroll-Permanent employee

List of Policy Existing Policies Recommended Policies

Attendance List N/A

Recorded manually with related department

head

Absenteeism No Formal Policy Maximum 2 days a month

Warning Letter N/A, No Formal Policy

Given if employees’ absenteeism more than

2 days in a month. The second warning letter

is given if there’s no good faith came from

the employee after salary reduction. The last

warning letter is given if there’s no good

faith comes after the second warning letter is

given

Salary Reduction N/A

Applied, if there’s no good faith comes after

the first warning letter is given

Employee’s Layoff No Formal Policy

Performed if no good faith after warning

letter has given three times

Salary Payer Director Related Department

Paycheck Slip N/A Applied, Two copy of paycheck slips

Reduction in take

home pay

N/A, only profession cost

Applied, reduction if the employee doesn’t

attend for work and profession cost

Tax Allowance N/A, gross method adoption Applied, gross-up method adoption

Source: Researcher’s Recommendation

Proposed payroll policies for non-permanent employees are stated on

figure 4.14 on the next page:



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Figure 4.14

Proposed Company Policy through Payroll-Non-Permanent Employee

List of Policy Existing Policies Recommended Policies

Attendance List N/A N/A

Absenteeism No formal policy

N/A, employees are stay in there

as long as the contract is going

Warning Letter N/A N/A

Wage

Reduction

N/A

Applied, No payment received

and meals allowance if the

employee doesn’t work

Employee’s

Layoff

N/A

N/A, employees are hired based

on contract agreement

Salary

Distribution

Daily, distributed by the

director

Daily, distributed by construction

administrator

Paycheck Slip N/A Applied, Two copies of paycheck

Reduction in

take home pay

N/A

Applied, reduction if the

employee doesn’t work

Tax Allowance N/A, gross method adoption

Applied, gross-up method

adoption

Fringe Benefit N/A Applied, meals facility

Source: Researcher’s Recommendation



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Several new policies are proposed, such as the one that regulate absenteeism

for both permanent and non-permanent employees and further process such as

warning letter and employee’s lay off. Reduction in employee’s take home pay

also regulated hence each employee will be fairly paid depends on their

performance and contribution to the company.

Several policies that impact the performance of tax planning are the

existence of tax allowance for permanent employees and fringe benefit for non-

permanent employees.

4.3.3 Proposed Payroll System

After analyze and review deficiencies in payroll system for both permanent

and non-permanent employees, several payroll procedure improvements should be

made. A computerized system, segregation of duties, and authorization are

proposed for better company’s performance through payroll system. Income tax

art.21 software also recommended for the alleviation in performing income tax

art.21 procedure.

The existence of personnel and timekeeper are very important to assure that

the company has good internal control on its payroll system. The importance of

relevant and adequate data also being proposed for better double-check.

Employee’s database takes a significant influence too for the system, since it

stores the original data which are being processes across department.



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Descriptions of proposed flowchart for permanent employee payroll system

are stated below:

1. The system starts from personnel which approves employee’s recruitment.

The personnel then input employees’ data such as employee’s name,

address, date of birth, etc. After the personnel enter the data, an employees’

document is created. This document consists of list of employees’ data. The

document then sent to the director.

2. The director then determines whether to approve or reject the data given by

the accountant. A rejection is made if the accountant is misstated the data.

Approval is made if the director is agree to the contain of employees’ data.

3. The director then sets employees’ ID number, each employee’s salaries per

month, and permitted overtime rate per hour. The director then creates

approval on it. A personal document is created. This document consists of

employee’s main data, job description, and salary information.

4. Two copies of personal document are created. The copy of document is

quite different to the original one, since it doesn’t consist of employees’

name but their employee’s ID for employee’s confidential. Both of the

original and the copy one is signed already by the director.

5. The original document is distributed to the personnel, while the first copy is

distributed to the accountant. The second copy is stored in company’s

internal data.

6. Meanwhile, in maintenance and procurement department, the employee

which handles the duty as timekeeper, record the attendance list which

consist of daily work hour and overtime manually. Daily attendance report



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then distributed to the head manager everyday to be approved. At the end of

month, the attendance list is collected and distributed to the accountant.

7. After receive a copy of personal data and attendance list, the accountant

then prepare what it needs to calculate the salary and tax allowance during

the period. The accountant then determines employee’s take home pay and

income tax art.21 allowance by using income tax art.21 software.

8. After determine the amount, the accountant then creates a document and one

copy of salary and allowance expense. The copy of document then

distributed to the director to be reviewed and as the basis of paycheck

withdrawal.

9. The original document is journalized and posted to the ledger by the

accountant.

10. When the director receives the salary and allowance expense document, the

director then checking the document by comparing with the database. Then

the document is become the basis of money withdrawal.

6. The director then goes to the ATM center to withdraw the money. A

withdrawal slip and employees’ paycheck is received by the director. Then

he copies the withdrawal slip.

7. The original withdrawal slip is stored in company’s internal data storage,

while the copy of withdrawal slip is transferred to the accountant. The

director also transfers the paycheck to the head manager of maintenance and

procurement department to be distributed.



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8. The personnel then create employees’ paycheck slips, then it distributed to

the head manager of maintenance and procurement department. The

paycheck contains employee’s name, ID, and the amount of salary receive

with certain description. The paycheck contains two pages, the original one

will be kept by the employee, while the other will be distributed to the

accountant.

9. The head department then distributes each paycheck and paycheck slip to

each employee. Each employee should sign the paycheck slip both in the

original and copy form.

10. The original page of paycheck slip then gives to the employee, while the

copy page is collected alphabetically and then distributed to the accountant

as the proof of cash disbursement.

11. After receive employees’ paycheck slip from head department of

maintenance and procurement, the accountant then creates reconciliation

through employees’ salaries (if any).

12. After the reconciliation is made, the accountant then makes the statement of

financial position. A fiscal reconciliation is made after that to separate the

account which is prohibited by the income tax regulation.

Steps in recommendation flowchart for non-permanent stated as follow:

1. The system starts from personnel which approves employee’s recruitment.

The personnel then input personal data of employees such as employee’s

name, address and others through computer.

2. After the personnel enter the data, a personal document is created. The

document then sent to the director to be review and approved.



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3. The director reviews the data since a misstatement might incur. After the data

is approved the director then set the daily wage for each employee.

4. An approval is made for the data, and personal document is created. This

document consists of employee’s personal data, job description, and salary

information.

5. Two copies of personal document are created. The copy of document is quite

different to the original one, since it doesn’t consist of employees’ name but

their employee’s ID for employee’s confidential. Both of the original and the

copy one is signed already by the director.

6. The original document is distributed to the personnel, while the first copy is

distributed to the construction administrator. The second copy is stored in

company’s internal data.

7. After the personnel receive back the personal data, then he creates paycheck

slips with the data he get.

8. A complete paycheck for a contract then distributes to the construction

administration.

9. The accounting department then makes a preparation for daily wage

calculation expense. The accountant journalize and posting use the list of

contract (consist of number of employment, daily wage, and supporting

document) as the supporting data.

10. The wage and allowance expense documents are created. The original

document then becomes the basis for further accounting processes such as

journalize and posting. The copy of document then transferred to the director.



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11. After the director receives the document (wage and allowance expense), the

director then review the document with supporting data on the database, such

as contract agreement, employees’ agreement, and personal data.

12. The document as the basis of money transfer then. After the document is

reviewed, the director then transfers the money from the company’s main

account to its petty cash. The document then transferred to the construction

administrator.

13. A transfer slip is received then by the director after transfer is successfully

performed.

14. A copy of transfer slip is made.

15. The original one is stored in company’s internal data while the copy of

transfer slip is distributed to the accountant to be recorded and processed for

further accounting process.

16. Meanwhile, in construction department, the employee who handles the duty as

timekeeper, record the attendance list manually.

17. Daily report is made by the employee and distributed to the head manager to

be approved.

18. Approval is made after the head manager check the attendance record for a

day. After approval is made, the approved attendance record then transferred

to the constriction administrator.

19. The construction administrator then review the attendance report by matching

with the data transferred by the director. Any wrong data then corrected by

construction administration before agrees to the data. The data becomes the

basis of petty cash withdrawal.



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20. After all the construction admin then withdraw the money from the ATM.

Paychecks and withdrawal slip is received after the transaction is successful.

A copy of withdrawal slip is made to be headed to accounting department at

the end of the contract.

21. The construction administrator then distributes both the paycheck and

paycheck slip to each employee.

22. When the employee receives the daily wage, the employee should sign the

paycheck.

23. The employee receives the original paycheck, while the copy one is collected

by the manager.

24. After the construction administrator distributes daily wage, the construction

administrator then collects daily paychecks until the contract is done.

25. The manager then distributes complete copy of paychecks with complete

withdrawal slips to the accountant.

26. The accountant then reconciles the data which are just received from the

construction administrator (wage and allowance expense). Reconciliation is

made if any employee who didn’t attend for work as long as the contract is

going, so it could affect the wage and allowance expense. At the end of month,

the statement of financial position is created. Fiscal reconciliation is also

made.

Recommendation context diagram, data flow diagram and also flow chart

are stated on the next page:



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Paycheck slip creation

Payroll

Process

Accountant

Director

Bank

Employees

Employees’ Data

Salary Report

Salary and paycheck slip

Personal dataMoney and Withdrawal Slip

Withdrawal sheet


Withdrawal and paycheck

Slip

Timekeeper

Attendance and overwork list

Personnel

Withdrawal slip

Figure 4.15

Data Flow Diagram – Context Diagram of Recommendation Payroll

Process for Permanent Employee

Source: Research Recommendation through Internal Data

The recommendation of context diagram for non-permanent employees are

stated on the next page:



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Raw DataEmployees’ Data

Attendance list

Payroll

Process

Accountant

Director

Bank

Employees

Salary Report

Wage and paycheck

slip

Raw DataMoney and

Withdrawal Slip

Withdrawal sheet

Withdrawal and

paycheck Slip

Timekeeper

Personnel

Transfer slip

Figure 4.16

Data Flow Diagram – Context Diagram of Recommendation Payroll

Process for Permanent Employee

Wage Report

Attendance list

Construction

Admin.

Paycheck slip and

withdrawal slip


Data flow diagrams for both permanent and non-permanent employees are

figured on the next page:



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Paycheck and paycheck slip

Paycheck and slip Copy of slip

Personal Data

Figure 4.17

Data Flow Diagram of Recommendation System for Permanent Employee – Level 0

1.0

Recruitment and

Input Data

Accountant

Director

Employees

Raw

Dat

a

Employees’ Data

Employees’ Data

2.0

Calculation of

Income Tax Art.21

Director

Approval

Salary Report

Accountant

Salary Summary Report,

income tax art.21 list

Personal data

3.0

Paycheck

Distribution

Accountant

BankMoney and withdrawal slip

Withdrawal sheet

Withdrawal slip

Director

Employees

PersonnelEmployees’ Data

Raw Data and Personal Data

Timekeeper


Withdrawal slip

Personnel

Paycheck creation

Personal data

Head Manager




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Figure 4.18

Data Flow Diagram of Recommendation System for Permanent Employee – Level 0

1.0

Recruitment and

Input Data

Accountant

Director

Employees

Raw

Dat

a

Employees’ Data

Employees’ Data

2.0

Calculation of

Income Tax Art.21

and Payment

Director

Wage ReportAccountant

Salary Summary Report,

income tax art.21 list

Personal data

3.0

Paycheck

Distribution

Accountant

BankMoney and withdrawal slip

Withdrawal sheet

Withdrawal slip

Director

Employees

PersonnelEmployees’ Data

Raw Data and Personal Data

Timekeeper


Withdrawal slip

Personnel

Paycheck creation

Personal data

Co. Admin

Paycheck and slip

Copy of slip

Personal Data

Co. AdminAttendance LIst

Approval

Wage and paycheck slip




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CHAPTER 5

CONCLUSION AND RECCOMMENDATION

5.1 Conclusion

After review and analyze existing problems arise in Company SS, the

conclusions can be inferred through the problems are:

1. Gross up method is the most favorable method to be applied for tax

planning of income tax art.21 for both permanent employees. The

implementation of fringe benefit and gross up method for income tax art.21

is becomes a great combination to effective tax planning for income tax

art.21 for non-permanent employees. The implementation of fringe benefit

also could enhance and increase company return.

2. An adequate policy to enhance work efficiency is needed for provide

effective work surrounding in company SS.

3. A computer-based system for payroll is necessary, considering by

computer-based system could enhance company’s performance because of

the complication of taxation procedure. A fine segregation duty in payroll

system could minimize bad event such as data loss and fraud. A good

system, separation of duties, and strict policy will enhance company’s

effectiveness and efficiency and which will leads to effective tax planning.



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5.2 Recommendation

Numerous recommendations of the research are:

1. Tax planning of income tax art.21 for permanent employees by gross-up

method and both by application of gross-up method and in form of fringe

benefit by providing meals for all non-permanent employees is proposed.

Gross-up method is suggested to generates higher tax saving and creates win-

win between company and employee. Based on the prior evaluation through

income tax art.21 applicable method, gross-up method will give higher

advantage to the company.

2. Existence of new payroll policies are needed to enhance company SS

efficiency for expanding its’ business.

3. Computerized system and Income tax art.21 software is recommended to be

used since company can be more effective and efficient compared to if

company must calculate income tax manually. It is low-priced, so the

company could buy it with no pain. It’s also reduces the usage of redundant

paper and complication through the calculation.



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