JAFA, 8(1), June 2021, 46-62 P-ISSN: 1979-6862 DOI: 10.21512/jafa.v8i1.7387 E-ISSN: 2746-6019 46 DESIGNING VALUE-ADDED TAX (VAT) POLICY ON PEER-TO-PEER LENDING IN INDONESIA Nafis Dwi Kartiko 1 ; Ismi Fathia Rachmi 2 1 Directorate General of Taxation, Jl. Jend. Gatot Subroto No. 40-42 Jakarta Selatan 12190, Indonesia 2 Students of the Doctoral Program in Accounting, Faculty of Economics and Business, Gadjah Mada University, Sleman Regency, Special Region of Yogyakarta 1 nafisdwikartiko@gmail.com; 2 ismifathia@gmail.com ABSTRACT Fintech is one of the newest business models in finance that take advantage of technological advances. One form of fintech in Indonesia is peer-to-peer lending. Based on the 1984 VAT Law, one service not subject to value- added tax is financial services. The reason globally for this is the difficulty in determining the tax base. However, according to the authors, these reasons cannot be accepted by considering the peer-to-peer lending business model. The authors provide reasons based on classical theory and existing empirical facts. This research outlines the urgency of establishing laws at the level of laws on fintech and the imposition of value- added taxes on peer-to-peer lending in Indonesia. In conclusion, the authors suggest that the government needs to (1) encourage the formation of laws and regulations at the level of the law on fintech to include criminal provisions such as laws in other financial institutions; (2) imposing a value-added tax on peer-to-peer lending, and (3) We encourage tax authorities to issue implementing regulations related to the imposition of value-added tax on peer-to-peer lending in Indonesia. Keywords: fintech; peer-to-peer lending; value-added tax INTRODUCTION Financial technology or Fintech is a combination of financial services with technology that eventually changed the business model from conventional to moderate, which initially in making payments must be face-to-face and carrying a specific portion of cash, can directly make long- distance commerce by making payments that can make in a subject of seconds (Syah et al., 2020; Firdaus & Aryanti, 2019; BI, 2020). In 2016 London became the fintech hub, followed by New York and other cities that struggled to reach the top, such as Paris, Hong Kong, and Singapore (Chishti & Barberis, 2016). The birth and emergence of Fintech were rooted in the onset of the financial crisis and the erosion of trust. Public anger towards the banking system makes financial innovation grow perfectly (Dermine, 2017; Parlour et al., 2019). Digital natives or millennials will be potential consumers because their preference in understanding and mastering mobile-based services is excellent (Afandi, 2020; Callaway, 2019). These favorable circumstances make fintech service providers present, and then they offer new and fresh services at a lower cost through mobile applications or platforms that they design well (Iman, 2018; Chishti & Barberis, 2016). The Financial Services Authority (Financial Fervices Authority) classifies Fintech in Indonesia into Fintech 2.0 and Fintech 3.0 (Putra et al., 2021; Benuf et al., 2020). Fintech 2.0 is a fintech for digital financial services operated by financial institutions, such as Mandiri Online by Bank Mandiri (Franedya, 2018). Fintech 3.0 refers to technology start-ups with financial innovation products and services (Arner et al., 2015; Leong & Sung, 2018). One type of Fintech in Indonesia is peer-to-peer lending. On May 18, 2021, the Financial Services Authority released 138 fintech platforms (peer-to-peer lending) registered/licensed as of May 2021. Of the 138 platforms, it consists of 57 licensed media and another 81 with registered information (Financial Fervices Authority, 2021). Peer-to-peer lending is the effect of disruptive inventions in finance (Ryu, 2018).