The Jakarta Post
We should give credit where credit is due. High commendation should go to the Directorate General of Taxation for its vigorous campaign to reach out to taxpayers through better administration and information services in a concerted bid to enhance voluntary tax compliance.
Even though the tax office has yet to gain a reputation of being an efficient, clean and competent public institution, it has undergone gradual and consistent transformation from simply being a tax collector notorious for corruption to being a service provider.
But the incremental improvement in the integrity and technical competence of the tax authority should be viewed against the tax office’s limited budget for procurement of more modern hardware and the recruitment of more tax auditors.
Integrity is one of the keys to establishing a strong tax system, where taxpayers and the government are tied in mutual trust. Many studies by the World Bank and the Organization for Economic Cooperation and Development have concluded that taxpayers’ willingness to pay taxes is linked to their trust in institutions.
In a country like Indonesia with utterly poor tax compliance and notorious for being perceived as one of the most corrupt in the world, law enforcement approaches are insufficient to improve the tax culture and morale. The challenge is to raise public awareness and understanding as to why they have to pay tax, as individual taxpayers have accounted for less than 10 percent of total tax receipts, less than in any other lower-middle-income country.
The tax office, besides accelerating internal reform, has been stepping up its information campaign to enlighten taxpayers on their rights and responsibilities in order to nurture a culture of tax compliance, in which citizens see paying taxes as an integral part of their relationship with the government.
Explaining to the public how tax revenue is used to decrease poverty, reduce inequality, deliver public services and build infrastructure for inclusive growth has helped strengthen the awareness of accountability between citizens and the state.
The tax office has, since last month, intensified its information campaign through the mass media and email messages to help individual taxpayers fill out their annual income tax return documents and set up many drop boxes for those who file hardcopies of their returns before the March 31 deadline. Taxpayers who want to file their returns online but lack the facilities to do so can visit a tax office or temporary tax counters at major shopping malls.
However, the tax office cannot develop a good tax culture on its own. The whole government should contribute to creating an enabling environment for enhancing voluntary tax compliance, because tax compliance and tax morale are also influenced by taxpayers’ perception of the public services they get and, most importantly, of the integrity of the whole government.
Taxpayers will go all-out to evade or, whenever possible with the assistance of consultants, to avoid taxes if they believe a significant portion of tax revenue is lost to corruption and inefficiency. Hence, the anticorruption drive also plays a pivotal role in nurturing a tax culture.