Photo by Tax Office

JAKARTA (TheInsiderStories) – The Indonesian government has just completed the largest tax amnesty program in the country’s history. The policy was intended to raise tax revenue to finance, among other things, the government’s spending spree of infrastructure programs.​ The question is, what is next after the tax amnesty program?

Analysts say the government must improve its internal infrastructure of taxation agencies, such as increasing manpower in the tax sector, raising the competence of staff and giving tax collectors wider access to bank data.

The government should also review policies and cut red tapes as it moves to overhaul the tax collection system, billed by the public as one of the most corrupt systems in the country.

“It will be a comprehensive tax reform, now that we have information on the wealth of Indonesians,” said Yustinus Prastowo an taxation analyst from Center for Indonesia Taxation Analysis (CITA) during a discussion held on Monday (30/10).

Although revenues from the program fell short of President Joko Widodo’s target of US$100 billion with only $12 billion being collected, it was the declaration of a previously hidden hoard of $350 billion held by only one million entities (averaging at $350,000 per entity, or a hundred times per capita gross domestic product), equivalent to 40 percent of Indonesia’s GDP.

In the next year’s target, the government is called to be more realistic in setting the tax revenues target, amounted to Rp1,618 trillion ($120 billion), because, over the last few years, the actual tax revenues has always been below the target.

Economist from University of Indonesia Faisal Basri said that during the period of 2014-2016, the realization of tax revenues averaged 96 percent of the target. There was a time, the actual tax revenues were higher than target. As a case in point was tax revenues in 2008, which surpassed the target, namely 7 percent higher than the target due to the commodity boom.

In two years of President Jokowi’s administration (tax realization) dropped to 82 percent to the target. Without income from tax amnesty, the realization of tax revenues in 2016 is only about 74 percent,” he said.

Basri suggested that the next step for the Directorate General of Taxation is to focus on law enforcement against tax evaders by controlling the commitment of tax amnesty participants.

“After the completion of the amnesty program, the government should now give more attention to the creation of a conducive investment climate and the placement of amnesty funds. This move is needed to bring in the Indonesians’ assets deposited or invested in other countries like Singapore,” he said.

Yon Arsal, Director for Tax Revenues and Compliance at the Directorate General of Taxation said the taxpayer compliance in Indonesia has risen after the completion of the tax amnesty program in early 2017.

This is according to rising personal income tax through monthly tax installments (Income Tax/PPh, article 25) after completion of the country’s tax amnesty program as well as the rising number of annual tax return forms.

This means more Indonesian taxpayers are paying their taxes based on what they reported during the tax amnesty period.

“Prior to the tax amnesty program, few participants of the program made monthly tax payments to the government. In post-amnesty program times, however, there’s a significant increase in monthly payments,” said Arsal.

Writing by Elisa Valenta, Email: elisa.valenta@theinsiderstories.com