Cross-Border Lessons in VAT Compliance: A Systematic Review of Split Payment Mechanisms and Strategic Adaptations for Indonesia

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Published: Mar 10, 2026
Keywords:
Value-Added Tax (VAT), Split Payment Mechanism, Reverse Charge Mechanism, Tax Fraud, Digitalization, SME Liquidity

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Warsito
Ministry of Finance, Indonesia
Mobrik Redy Santoso
Ministry of Finance, Indonesia
Sakti Suhertian
Ministry of Finance, Indonesia
Almanda Ully Oktaviana Nasution
Ministry of Finance, Indonesia

Abstract

This study evaluates the effectiveness of the Split Payment Mechanism (SPM) and Reverse Charge Mechanism (RCM) in mitigating Value-Added Tax (VAT) fraud, specifically Missing Trader Intra-Community (MTIC) schemes, while analyzing their structural impacts on business liquidity and technological prerequisites. Employing a systematic literature review of 14 high-impact journal articles across jurisdictions such as the European Union, South Korea, and Saudi Arabia, the synthesis reveals that while RCM and SPM effectively reduce the VAT gap by approximately 5% in targeted sectors, they impose significant liquidity constraints on Small and Medium Enterprises (SMEs) due to the "blocked account" nature of tax collection. Theoretically, the research contributes to tax compliance literature by bridging the gap between legal frameworks and digital execution, highlighting the shift from self-enforcing VAT to real-time digital collection. The findings offer strategic policy implications for Indonesia, recommending a phased, sector-specific implementation supported by integrated e-invoicing infrastructure and liquidity protection safeguards, such as fast-track refunds. Future research is suggested to focus on longitudinal impacts within the Indonesian context to address the limitations of the current European-centric literature.

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Vol. 1 No. 1 (2026): Current Issue on Tax Administration
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