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Opposing new tax amnesty
Once again pardoning tax evaders, including those who have committed corruption, illegal miners and loggers and drug syndicates, seems to be a blank check for money laundering.
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Tax campaign: People pass a banner promoting the government's tax amnesty at Tanah Abang textile market in Jakarta. (Antara Photo/Wahyu Putro A)
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everal factors have been pressuring the government to sharply increase revenues in a short time. Among them are the fiscal deficit, which is required by law to be cut back to a maximum 3 percent of gross domestic product in 2023 from an estimated 5.5 percent this year, the big decline in tax revenues due to the 2.2 percent economic contraction in 2020 and the persistently bigger budget needed to fight the COVID-19 pandemic.
The reporting (declaration) of more than Rp 4.8 quadrillion (US$368 billion) worth of previously undisclosed assets, Rp 114 trillion in redemption money payments and Rp 21 trillion in other tax receipts that were brought about by the 2016-2017 tax amnesty are a great temptation for the government, which is strapped for cash, to strike another one-shot policy to sharply raise revenues in a short time.
The government also seems to assume big tax evaders would feel “under stronger pressure” now to join a tax amnesty because the Taxation Directorate General has since 2018 been getting data on Indonesian taxpayers’ assets kept in other jurisdictions that are signatories to the Organization for Economic Cooperation and Development’s (OECD) agreement on Automatic Exchange of Information (AEOI) in tax matters.
We nevertheless contend that another tax amnesty between July and December, as proposed in the bill on the amendment of the 1983 Law on general provisions on taxation under deliberation at the House of Representatives, would mostly cause a moral hazard, damage the government’s policy-making credibility and deeply hurt the public’s sense of justice.
We also doubt whether the remaining one month before the planned amnesty period starts in July and ends in December would allow for meaningful deliberations on such an important law regarding fiscal policy that has a great impact on people as a whole.
Once again pardoning tax evaders, including those who have committed corruption, illegal miners and loggers and drug syndicates, seems to be a blank check for money laundering and such a policy could prompt the Paris-based OECD Financial Action Task Force on Money Laundering (FATF) to blacklist Indonesia as a non-cooperative jurisdiction.
We think the tax office still does not have enough financial and human resources to develop a good mechanism for such a facility in the near future and to follow up the pardon with strong law enforcement and credible, comprehensive audits of taxpayers. Moreover, the tax office has yet to build up a strong infrastructure of tax information intelligence, based on information gathered during the previous tax amnesty period.
Many tax evaders also know that neither the tax office nor other law enforcement agencies have enough legal power and technical competence to hunt down and bring back their hidden assets to Indonesia even though the AEOI platform has enabled the tax office to gather more comprehensive data on assets hidden overseas by Indonesian taxpayers.
We are greatly concerned that since our tax administration system is still inefficient and technically incompetent, the costs of another tax pardon in terms of moral hazards to voluntary tax compliance and severe damages to government policy credibility would be quite more enormous than the short-term benefits.
