President-elect Joko âJokowiâ Widodo is proving serious about his plan for a nationwide tax overhaul, as one of his aides revealed on Wednesday that the new president would establish a semi-autonomous revenue agency
resident-elect Joko 'Jokowi' Widodo is proving serious about his plan for a nationwide tax overhaul, as one of his aides revealed on Wednesday that the new president would establish a semi-autonomous revenue agency.
Andi Widjajanto, a deputy on Jokowi's transition team, said the team had proposed several options and that Jokowi would decide among them.
'We can strengthen taxation by establishing either a tax authority agency or a state revenue agency,' he said, adding that a revenue agency would manage several offices that collected state income such as tax and custom offices, as well as the office dealing with non-tax income.
Andi made the statement on the sidelines of a meeting at the Office of the Coordinating Economic Minister in Central Jakarta.
Andi said the establishment of the new tax agency was aimed at increasing the tax-to-gross domestic product (GDP) ratio, which currently stands at a paltry 12.6 percent. According to a report by the Organization for Economic Cooperation and Development (OECD), Indonesia's tax-to-GDP ratio is one of the lowest among the G20 countries. The ratio is the total tax revenue divided by the country's GDP.
'Our target is to reach 13.5 percent [in the near future] and, later, to reach an ideal figure of 14 to 15 percent by 2019,' he said.
The country's tax revenue target as laid out in the state budget has not once been met for the past seven years.
This year, the tax office has predicted a Rp 90 trillion (US$7.6 billion) shortfall.
According to Andi, the new agency will report directly to the president.
Under the current government administration, the agency responsible for collecting taxes is the Directorate General of Taxation, which falls under the auspices of the Finance Ministry.
Taxation director general Fuad Rahmany previously said that the tax office needed, at minimum, an additional 70,000 employees to allow the office to meet its tax collection target.
The number of staffers at the tax office last year was 32,000, while the office proposed to recruit 5,000 new employees every year. On that basis, it would take 14 years to achieve the ideal number of employees needed to conduct tax collection in the country.
With the current number of staff, each tax official has to handle 7,000 tax returns, far higher than the ideal number of 500.
Nevertheless, Andi said the new tax agency would not rely on a huge number of human resources in order to boost tax revenue.
'We have already calculated that if we use the ratio of human resources suggested by the tax directorate general, then it would take 18 years [to meet the ideal figure],' he said. 'It's not possible for us to wait 18 years.
'Therefore, the next administration would improve the taxation system rather than increase human resources, Andi said. 'So we will be prioritizing the IT [information technology] system,' he said.
However, the new tax agency is not expected to be up and running in the near future, as it will not be Jokowi's first priority after being sworn in as president on Oct. 20, according to Andi.
'It cannot be immediately [established] after [Jokowi] is sworn in because a regulation will have to be issued first,' he said.
Andi added that Jokowi could hasten the establishment of the new tax agency by issuing a government regulation in lieu of law (Perppu).
'If it has to go through the House of Representatives, then there will be a six-month period [before Jokowi can establish the new tax agency],' he said.
___________________
We can strengthen taxation by establishing either a tax authority agency or a state revenue agency.
Share your experiences, suggestions, and any issues you've encountered on The Jakarta Post. We're here to listen.
Thank you for sharing your thoughts. We appreciate your feedback.