JAKARTA (TheInsiderStories) - The government of Indonesia officially ended the Tax Amnesty program in the first quarter of this year after going on for the last 9 months. The program has revealed hidden assets, but did little to broaden the country’s low tax ratio as reflected in low number of new tax payers taking part in the program.
Many people see this program to have been successful because it reveals the hidden assets of the country’s citizens valued at at least Rp4,866 trillion ($365 billion) or equal to nearly 40 percent of Indonesia’s GDP. Meanwhile, the program left a job for the tax authority to expand the low taxpayer base.
According to the government’s data, the number of registered taxpayers in Indonesia reached 33.34 million. However the taxpayers who participated in the Tax Amnesty reached only 891,000. Meanwhile, the number of new taxpayer who register during the Tax Amnesty program reached only 44,000 people, indicating that the recent Tax Amnesty program did little to widen the tax base.
Like other least developed countries, Indonesia has been struggling to get more taxpayers. Therefore, last year, the government only collected just around 10% of GDP, which is lower than average poor countries 13% or 34% with rich countries. This makes the fiscal room to become limited as the President’s ambition to boost basic infrastructure becoming more difficult.
The limited taxpayers in Indonesia is a result of law taxmen number, which reached only 4,500 tax inspectors to supervise 250 million population. “75 percent of declared assets were originating from within the country, showing our tax potential discovered during the Tax Amnesty program,” Yustinus Prastowo, tax expert said. He also believed that the problem does not only lie on the limited taxmen, but also the limited authority taxmen to accessed banking customer data.
Unlike developed countries, Indonesia’s economy is largely informal and thus beyond the reach of taxmen. The effort of tax authority to invite informal sector to participate in the Tax Amnesty was quite unsuccessful.
Finance Minister Sri Mulyani Indrawati said that government will monitor the taxpayer who did not take part in the tax amnesty until the reporting annual tax notification letter on April 21. “If they do not took part in the tax amnesty and did not file tax report, we will impose law enforcement,” she said.
She mentioned that the number taxpayers who took part in Tax Amnesty both individual and informal business is very low, compared the potential taxpayers, given the fact that the number of middle class population in Indonesia is estimated to reach 90-100 million. “I am sure they actually do not pay tax properly,” she added.
Meanwhile, the Tax Amnesty also fails to bring home hidden assets from abroad. The funds committed for repatriation until the end of the Tax Amnesty only reached Rp147 trillion. Like other countries, Indonesia also faces the avoiding tax practice who is designed by multinational companies and high wealth individual which are estimated to exceed $200 billion a year, according to IMF research.
Technical and regulatory issues become big obstacles to repatriation. The citizen who hide their asset in other countries difficult to liquidating the non-liquid assets like real estate, bond, and deposit while some foreign jurisdictions also makes the effort to repatriation become hard.
The businessmen hope Indonesia tax regime will be much better after tax amnesty and thus friendly for investors. “We hope the government considers the tax as long term project because many countries try to invite foreign direct investment,” Johnson Sucipto, Deputy Chairman of The Indonesia Chamber of Commerce and Industry stated. (RF)