T

he government'€™s efforts to achieve its tax revenue target this year will potentially become more challenging as tax receipt remained weak by the end of last month, analysts say.

As of May, tax revenues reached Rp 377 trillion (US$28.3 billion), decreasing 2.44 percent from the same period last year, or around one third of this year'€™s target of Rp 1.29 quadrillion, according to data released on Thursday by the Finance Ministry'€™s tax office.

The tax office has said that the May tax data was reflective of the country'€™s economy, which grew only 4.7 percent, the lowest since 2009, with overall value added tax (VAT) falling six percent to Rp 141.6 trillion due to a decrease in domestic
consumption.

Yustinus Prastowo, executive director of the Center for Indonesia Taxation Analysis (CITA), expressed a similar view, saying that the economy had impacted the VAT. He said efforts to increase the tax base could be made by the tax office to fix the situation.

The tax office can increase the tax base by adding to the number of corporate taxpayers (PKP). So far, updates on new and old taxpayers have not been disclosed by the tax office, Yustinus said.

'€œThe tax office can pursue corporate taxpayers who have yet to be registered, while there were existing ones who already ceased to be in the category,'€ Yustinus said after a discussion on Friday.

According to him, the tax office should announce periodically the data of corporate taxpayers in order for the public to know whether there is a miscalculation when their number increases yet their overall taxes decline.

When their number is stagnant and tax receipt decreases, he added, the data can also help the tax office to decide whether to conduct tax extensification.

Tax office spokesperson Mekar Satria Utama, meanwhile, said the July 1 implementation of electronic invoices (e-faktur) would improve the administrative system for VAT.

The new system was designed '€œto reduce tax leakage in VAT restitution'€.

A second strategy prepared by the tax office to increase tax receipt would be an effective improvement for its investigators during their direct and on-site investigations on taxpayers, while also finding new potential taxable areas, Mekar added.

Finance Minister Bambang Brodjonegoro previously said that tax extensification could boost new taxpayers as currently out of 45 million Indonesians who have jobs, 26.8 million own a tax file number (NPWP), yet only 10 million of the NPWP holders actually pay taxes.

'€œWe are also expecting an acceleration from the recent reinvention policy [a write-off of tax fines to draw in more taxpayers] that we implemented last month,'€ Mekar said.

Despite a drop in VAT, the tax office data revealed an increase of 10.6 percent year-on-year in non-oil and gas income tax (PPh) to Rp 215.3 trillion as of May, mainly contributed by other types of income tax which rose 114.8 percent.

According to Yustinus, withholding tax remains a major contributor of income tax increases, while '€œtax on foreign services also increased, even though we do not know the cause yet, whether we hire more foreign workers'€.

'€œIn the short-term, we cannot expect more breakthroughs as we predicted that the reinvention policy could perhaps only raise Rp 50 trillion in additional receipts at the most. We think this year'€™s target is hard to achieve,'€ Yustinus said.

Perkumpulan Prakarsa (Center for Welfare Studies) executive director Setyo Budiantoro echoed Yustinus'€™ opinion that tax revenue would reach 40 percent of this year'€™s tax target instead of only 29 percent due to the weak economy, which should be spurred by better government spending on infrastructure.