It seems that it will be difficult to fulfill the hope that state revenues from the tax amnesty program’s redemption money will surpass the targeted Rp 165 trillion (US$12.35 billion) at the end of its third period. The concern that the target will not be fulfilled arises from the fact that the redemption money collected in the first period (from July 1 to September 30, 2016) was only Rp 97.16 trillion.
In the second period (from October 1 to December 30, 2016), the amount decreased to Rp 12.61 trillion. In the third period (from January 1 to March 31 2017), only Rp 2.23 trillion has been collected as of February 24. In total, the amount of collected redemption money as of February 24, 2017, is Rp 112 trillion (67.87 percent). The question is: why was the redemption money collected in the second and third period significantly lower than in the first period? Is it because a majority of taxpayers had already participated in the first period or is there another reason?
Still reluctant
From various sources of information, it is thought that there are in fact many taxpayers that have yet to participate in the tax amnesty program. Many wealthy taxpayers with assets hidden in tax havens are apparently not participating in the program. As a matter of fact, these people are the program’s priority targets.
The low interest of taxpayers in participating in the tax amnesty program is reflected in the amount of declared assets. Tax amnesty statistics as of February 24 show that, of the Rp 4,402 trillion declared assets, Rp 3,245 trillion (73.72 percent) are from domestic asset declaration and Rp 1,016 trillion (23.08 percent) from foreign asset declaration. The remaining Rp 141 trillion (3.2 percent) is repatriated foreign assets.
The low amount of declared and repatriated foreign assets is ironic because, far before the tax amnesty program was launched on July 1, 2016, then Finance Minister Bambang Brodjonegoro estimated that the amount of taxpayer assets parked abroad reached some Rp 11,400 trillion. If this estimation is correct, then the tax amnesty program could only reach 10.15 percent of taxpayer assets parked abroad. How ironic.
Apart from that, data released by the directorate general of taxation on February 13, 2017, shows that only 702,052 taxpayers have participated in the tax amnesty program – out of 30.04 million Indonesians with a taxpayer identification number (NPWP). This shows that the interest of taxpayers and corporations in the tax amnesty program is still incredibly low (a meagre 2.3 percent). The question is, why are so many wealthy taxpayers with hidden assets abroad still reluctant to join in the tax amnesty program? Why are taxpayers not interested in joining the program?
In my opinion, the main reason is a lack of requirements for taxpayers’ public transparency and information accountability. Law No. 11/2016 on Tax Amnesty does not stipulate such a requirement. On the contrary, the law protects the identity of taxpayers participating in the amnesty program. The assumption was that, with the secrecy of their identities secured, taxpayers would enthusiastically participate in the program. As it turned out, the assumption was wrong.
The small percentage of redemption money is apparently not attractive for many taxpayers.
The tax amnesty law stipulates a redemption money percentage of 2 percent, 3 percent and 5 percent in the first, second and third period, respectively, for repatriation and declaration of domestic assets. For repatriation and declaration of foreign assets, the redemption money percentage is 4 percent, 6 percent and 10 percent in the first, second and third period, respectively.
Apparently, these offers did not interest a majority of taxpayers. Beyond that, President Joko Widodo’s threat to apply harsh sanctions and taxes on disobedient taxpayers has not frightened them. Despite the government having repeatedly reaffirmed that it has all the information on taxpayers and that there will be consequences for disobedient taxpayers, a majority of taxpayers have yet to heed this warning. Perhaps a majority of taxpayers doubt these statements.
Publish taxpayer profiles
As mentioned before, one of the major drawbacks of the tax amnesty law is its protection of the identity of taxpayers participating in tax amnesty. On the one hand, such protection has motivated noncompliant taxpayers to participate in the tax amnesty’s first, second and third period.
However, on the other hand, the protection guarantee has encouraged other wayward taxpayers not to take part in the tax amnesty program. The reason is that people who either agree or refuse to participate in the program are both protected from risks to their reputation as the government cannot legally publish the taxpayers’ profiles. As reputations are protected in both options, it is more beneficial not to participate in the tax amnesty program.
This notion is reflected in the fact that the government has yet to publish the exact number of taxpayers required to join in the tax amnesty program, how many taxpayers have parked their assets abroad and how many foreign assets can we expect to be declared or repatriated. Such uncertainties have created speculation among taxpayers that the government in fact does not have an exhaustive and accurate database of taxpayer profiles.
Therefore, to ramp up the tax amnesty program and reach the target of Rp 165 trillion in the program’s final weeks, President Joko Widodo and Finance Minister Sri Mulyani Indrawati must immediately formulate a new policy to “enforce” noncompliant taxpayers to participate in the tax amnesty program. The government should strengthen its database of taxpayers, their asset profiles and categorize taxpayers based on their participation in the program. Creating a database of Indonesian taxpayers who have parked their assets abroad should be the main priority.
If the database is available, the government should immediately publish the list of taxpayers who have and who have not participated in the tax amnesty program, as well as the assets that have and have not been declared or repatriated by these taxpayers. The government should send written warnings to noncompliant taxpayers. The President should explain directly to wealthy taxpayers what the consequences will be if they refuse to join the tax amnesty program. For example, the government can publish their names if they still refuse to participate in the program after March 2017.
With these changes, noncompliant taxpayers will hopefully be more serious about participating in the tax amnesty program because they will be frightened that their personal information will be released to the public, therefore threatening their reputations. Reputation risk is something that frightens taxpayers, especially corporations and individuals in the upper-middle class. I believe that if the government is brave enough to make these changes, the target of Rp 165 trillion can be reached or even surpassed. Other targets will surely be achievable.
Andreas Lako
Professor of Accounting, Faculty of Economy and Business, Soegijapranata Catholic University, Semarang
