It was the last day in the first phase of the tax pardon program. Tycoons, politicians, preachers and ordinary people were keen to join in this phase to get away with the lowest penalty, a 2 percent fee charged on the repatriation of assets from abroad and 4 percent charged on the declaration of assets.

In the second phase, from October to December, the repatriation and declaration fees will be increased to 3 percent and 6percent respectively.

"This is the last chance for the taxpayers to get the cheapest tariff. Therefore, we are also all out, the tax office is open until the early morning, so that all taxpayers coming today are served," Directorate General of Taxation spokesperson Hestu Yoga said at his office on Friday.

The office provided 'night snacks' such as meatballs, satay, peanuts, sweet potatoes and coffee for its officers working late that night. The queue for tax amnesty applicants numbered 2,600 and kept increasing, as many taxpayers had to leave to pick up certain documents and then re-join the queue to complete their application.

"Many people think they are safe as soon as they have paid the tariff and got the payment receipt, but actually the application is considered incomplete until they hand us the asset declaration letter [SPH]," Hestu said.

The first period of the tax amnesty program until Friday night generated Rp 97.1 trillion (US$7.45 billion) in income from penalty fees, or 58.85 percent of the Rp 165 trillion targeted by the government. It saw total assets of Rp 3.38 quadrillion declared and Rp 135 trillion in assets repatriated.

However, efforts to improve state revenue collection do not end with the tax amnesty program. The government has prepared a long-term project to improve the overall taxation system in Indonesia through legal reforms.

"That is a big amount, showing that many people have put their trust in the government’s program. We will not waste it and will continue with the tax reform program," President Joko "Jokowi" Widodo said at the tax office on Friday.

Long-term benefits

Citibank Indonesia head economist Helmi Arman said the tax amnesty program would improve the tax base in Indonesia in the long run and would become a solution for the overly optimistic tax revenue target. He believes the income from penalty fees will be adequate to cover potential shortfalls in tax revenue this year.

"The 2016 tax revenue target is too optimistic, but the collection trend is still on a good run. In the long run, the tax amnesty program will help expand the tax base," he said during a visit to The Jakarta Post.

President Jokowi said the government would follow up the tax amnesty program with a revision of the general taxation system on income tax and value added tax to make Indonesia more competitive vis-à-vis neighboring countries.

Reforms to the tax system are planned in various areas, such as a tax cut in real estate investment trusts (REIT), a VAT reduction in the automotive sector to make sedans more affordable, and tax waivers in Islamic financial products.

However, most businesspeople want the income tax, among others, to be more competitive.

"If income tax could be cut, that would be very good, as it would make Indonesia more competitive in the ASEAN Economic Community, in which we can invest in one particular ASEAN member country, but still can grab the Southeast Asian market due to free trade," Sinarmas Group chairman Franky Oesman Widjaja said.

Responding to that, Finance Minister Sri Mulyani Indrawati promised that the country’s tax system reform would be holistic, pertaining not just to regulations but also to tax officers and the taxation system.

Thus, the extra effort shown by tax officers in serving tax amnesty participants on Friday night may be just the beginning of more big things to come in the Indonesian taxation system. (ags)

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