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Jakarta Post

Indonesia in race against time to take advantage of tax amnesty

Entering the final two weeks of its tax amnesty, the government has pledged to make an all-out effort to ensure the success of the signature program amid the dire need to safeguard tax revenue this year.

Grace D. Amianti (The Jakarta Post)
Jakarta
Fri, March 17, 2017

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Indonesia in race against time to take advantage of tax amnesty Taxation Directorate General officers introduce the government's tax amnesty program to Jakarta residents at the Tax Amnesty booth in Pasar Baru, Jakarta, on Nov. 8. (Antara Photo/Muhammad Adimaja)

Entering the final two weeks of its tax amnesty, the government has pledged to make an all-out effort to ensure the success of the signature program amid the dire need to safeguard tax revenue this year.

The government expects to increase its tax revenue by 18 percent this year to Rp 1.31 quadrillion (US$98 billion) after a disappointing result in 2016, during which it saw tax-revenue realization up by only 3.5 percent, despite a boost from tax amnesty penalties.

If penalties from the tax amnesty are excluded, routine tax revenue realization declined by 4.8 percent last year, showing the country’s lack of adequate power to improve tax collection.

Finance Minister Sri Mulyani Indrawati said the government would optimize its efforts by heightening its publicity campaign on the tax amnesty, including through persuasion of various business players to partake in the program.

“We’re optimizing the effort in these two weeks because it is [currently] running in parallel with the annual tax return form [SPT] submission for individual taxpayers,” she said recently.

Through the introduction of the nine-month tax amnesty program, which will end on March 31, the government hoped to repatriate billions of dollars that citizens had parked overseas. The penalty payments are also expected to help close the gap in state revenue amid declining energy prices and a sluggish global economy.

Approaching the tax amnesty deadline, the Directorate General of Taxation is still routinely conducting publicity campaigns in regional offices and it claims that there is an uptrend in participants in the program, with an average of 4,000 taxpayers joining per day.

Tax amnesty participants reached more than 700,000 as of this week, up from the 425,000 recorded by the end of last year when the program completed its second phase.

Penalties from the tax amnesty reached Rp 106 trillion as of Thursday evening, tax authority data show.

“Our [tax revenue] target is challenging and we don’t have the luxury of taking a break,” tax authority spokesman Hestu Yoga Saksama said. “After the tax amnesty ends, we will keep moving on to secure tax revenue this year.”

The taxation directorate general is preparing to deploy at least 5,000 account representatives as temporary inspectors to help with investigation as part of law-enforcement measures post-tax amnesty to punish those still owning undeclared assets, as mandated by the 2016 Tax Amnesty Law.

The government-appointed tax reform team, which was launched last year to improve the performance of tax authorities, is also expected to dig deeper in potential sectors that remain untapped by tax collection as well as enhance data and information sharing between regional offices and tax service branches, Minister Sri Mulyani said.

“This will allow data on potential tax collection held by the headquarters to be shared with the lowest tax service offices,” she said.

The taxation directorate general claimed that tax collection in the first two months of this year showed a positive trend as it reached Rp 134.6 trillion by February, which represents around 10 percent of the 2017 targeted figure, says Yon Arsal, tax revenue and compliance director at the directorate general.

The figure, which includes oil and gas tax revenue, increased by 8.15 percent compared to the same period last year.

Jakarta-based think-tank Center for Indonesia Taxation Analysis (CITA) executive director Yustinus Prastowo, meanwhile, said that in order to ensure stronger law enforcement, the directorate general might need to conduct sampling audits by selecting tax service branches and regional offices seen as having potential untapped taxpayers.

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