Dialogue Over Sanctions: Lessons From Brazil’s Tax Settlement System for Designing Trust-Based Mediation in Indonesia

Abstract

Indonesia's persistent backlog of tax disputes underscores systemic limitations within its litigation-heavy resolution model, which often intensifies distrust between taxpayers and tax authorities. This research investigates the potential of introducing a trust-based mediation mechanism, drawing conceptual parallels from Brazil’s transação tributária—a progressive tax settlement model rooted in voluntary compliance, fiscal dialogue, and segmented negotiation. Employing a qualitative comparative method, the study integrates the Slippery Slope Framework, Modern ADR Theory, and Cooperative Compliance principles to examine Brazil's model's structural, legal, and behavioral components and contextual applicability to Indonesia. Despite institutional differences, Brazil’s emphasis on regulatory flexibility, codified settlement schemes, and structured mediation processes offers valuable insights for Indonesia’s tax administration reform. The study proposes a phased implementation strategy, starting with pilot programs under ministerial regulation (PMK), the institutionalization of neutral tax mediators, and the integration of mediation mechanisms at the pre-objection stage. These steps could transition Indonesia from a punitive tax regime toward a more collaborative and trust-oriented system, potentially easing dispute backlogs and improving long-term compliance. This research contributes to the evolving discourse on tax governance in developing countries, presenting a practical framework for embedding alternative dispute resolution within tax systems while aligning with local administrative and cultural contexts.