JAKARTA, KOMPAS — The policy of the volume II of tax amnesty is considered not urgent for Indonesia because the government already has a map and profile of taxpayers according to risk classification. The policy focus should be directed toward finding new sources of income and boosting tax reform.Executive director of the Center for Indonesia Taxation Analysis (CITA) Yustinus Prastowo, when contacted in Jakarta on Friday (2/8/2019), said the tax amnesty volume II discourse had the potential to harm the taxation system. This also creates a sense of injustice for those who have participated in the tax amnesty.
According to Prastowo, the government should focus on running the road map for law enforcement after the tax amnesty in accordance with Law No. 9/2017. The map includes tax reform and law enforcement that is measurable, impartial, objective and fair.
At present, the government already has maps and profiles of taxpayers according to the classification of high, medium and low risk. Taxpayers who have participated in the tax amnesty are included in the low risk category, while the medium and high risk taxpayers have not yet implemented their compliance. "They are the ones who should be the target of guidance (moderate risk) and law enforcement (high risk)," said Prastowo.
Finance Minister Sri Mulyani Indrawati, in a joint event with the Indonesian Chamber of Commerce and Industry (Kadin), gave a signal for the tax amnesty volume II. The government will examine the possibility of the tax amnesty policy for the second time.
The discussion was raised by Kadin chairman Rosan Roeslani who voiced the aspirations of business players. According to Rosan, many businesspeople expressed regret for not participating in the tax amnesty. He was confident the number of participants would increase compared to the previous period.
The government once held a tax amnesty for nine months, from 1 July 2016 until 31 March 2017. The program was attended by 965,983 private and corporate participants. The total declaration of funds reached Rp 4.866 quadrillion. The penalty payment was Rp 114 trillion (Kompas, 14/3/2018).
Of the total funds being declared, Rp 147 trillion was declared to be repatriated. The majority of fund owners were private taxpayers. Its realization, based on the latest data, namely as of March 2017, was Rp 127 trillion. The remaining Rp 20 trillion has not been repatriated.
Law No. 11/2016 regarding Tax Amnesty, among other things, requires tax amnesty participants in period I (July-September 2016) and period II (October-December 2016), who were committed to repatriation, to transfer their assets to the country by 31 December 2016 at the latest. As for period III (January-March 2017), they must transfer their assets no later than 31 March 2017.
IMF highlight
The International Monetary Fund (IMF) in the Article for Consultation 2019 report highlights Indonesia\'s relatively small income. The government was implicitly asked to avoid measures that could weaken state revenues, including additional tax incentives.
Indonesia\'s income at present is still below 15 percent of gross domestic product (GDP), relatively low compared to other developing countries, such as Malaysia, the Philippines, India, Thailand and Vietnam.
Rather than providing fiscal incentives, the government is advised to develop a short-term revenue strategy through policy and administrative reform in the taxation field. The objective is to find new sources of revenue.
Head of the Center for Macroeconomic Studies at the University of Indonesia, Febrio Kacaribu, said the government must be careful in providing tax incentives. That policy could backfire, especially when state revenues are currently sluggish.
"Indonesia even needs additional income. The tax ratio is still too low so it needs to create new opportunities to raise incomes," said Febrio.
Tax incentives and the reduction of taxation obligations are reflected in the realization of tax expenditure. Based on Finance Ministry data, the allocation of tax expenditure increased from Rp 143.6 trillion in 2016 to Rp 154.7 trillion in 2017. In 2019, tax expenditure is targeted to be around Rp 150 trillion.
On the other hand, the realization of state revenue as of June 2019 was Rp 898.8 trillion, or an increase of 7.8 percent compared to June 2018. Of the total revenues, tax revenues grew the weakest, at 5.4 percent, or Rp 688.9 trillion.
According to Febrio, tax incentives do not necessarily have an impact on the economy. The provision of incentives does indeed increase industrial production, but it is not significant. The increase in production is not as fast as the decrease in tax revenues. "The main problem is not the tax, but the uncertainty of production costs. That is the one that must be addressed," said Febrio.
One of the problems of production costs that must be solved, for example, is the cost of shipping goods from the factory to the port and the ease of licensing. Licensing regulation is considered complicated and complex, thereby burdening the production costs. The implementation of the integrated licensing system is not yet optimal. (KRN/CAS/MED)