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Tax compliance of legislators
The blunt fact is the tax culture in Indonesia is still very weak.
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Members of the House of Representatives attend a plenary meeting at the House complex in Senayan, Central Jakarta, on July 10. (Antara/Hafidz Mubarak A.)
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fter the Supreme Court decided last week to allow former corruption convicts to run in the legislative elections on April 17 next year, it is now more urgent than ever for the General Elections Commission (KPU) to require all legislative candidates to submit their tax records to show their integrity.
The KPU has previously required candidates for presidential and regional head elections to produce copies of their personal income tax returns for the past five years to prove their compliance with the country’s tax requirements. We fail to understand why a similar administrative requirement has not been put in place for legislative candidates.
Those who aspire to hold legislative positions are supposed to be upstanding citizens, dedicated to faithfully carrying out their civic duties, including filing annual tax returns to the Taxation Directorate General. Anyone who resists may have income and assets to hide and are, therefore, not qualified to represent the people in the legislature.
Certainly, the KPU is barred by law from revealing the content of candidates’ personal income tax returns because only tax officials are authorized to check these documents in the process of an audit. But those who regularly file properly filled-out tax return documents at least prove their willingness to disclose and make their incomes and assets available for examination through audits. This is also an initial indication of voluntary tax compliance.
Annual income tax return filings must disclose all financial and fixed assets, such as savings in banks, bonds, investments, cars, houses, etc. and this data is certainly valuable for the tax office to uncover any tax evasion or unusually high increases in income or assets.
The blunt fact is the tax culture in Indonesia is still very weak. For example, only 992,000 of the 16.3 million registered individual taxpayers who filed their 2017 income tax returns by the March 31 deadline were self-employed professionals such as doctors, consultants, lawyers, businesspeople, while 9.6 million were paid employees whose income taxes were withheld by their employers.
It is therefore no wonder that personal income taxes contribute only around 10 percent to total tax revenue and the tax ratio (revenue against gross domestic product) is only about 11 percent, the lowest in the ASEAN region.
The low number of personal income tax return filings also reflects the weak tax culture, low voluntary tax compliance and is even perceived to show massive tax evasion, notably among highly paid professionals and high net-worth individuals. This trend is worrisome because collecting more personal income taxes could help bridge the country’s ever-expanding income inequality.
The fact that over the past three years at least 135 members of different legislatures have been convicted of graft and dozens of others are on trial or have come under investigation for suspicions of corruption makes it even more imperative for legislative candidates to disclose their assets and prove their tax compliance.
Requiring the estimated 200,000 legislative candidates to demonstrate their tax compliance and integrity through the disclosure of their income tax filings is one way of preventing crooks from entering the legislatures and hijacking democracy.
