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Indonesians skeptical about tax transparency: Survey
As the government seeks to ramp up its tax collection efforts this year, half of all Indonesians doubt the government manages their taxes transparently, a recent survey shows
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As the government seeks to ramp up its tax collection efforts this year, half of all Indonesians doubt the government manages their taxes transparently, a recent survey shows.
The survey by Tempo Media Group and the Center for Indonesia Taxation Analysis (CITA) revealed that only 50 percent of Indonesians believed the country’s taxation system was transparent and that the funds were used for the country’s development.
The survey of 1,142 people, including 942 individual taxpayers and 213 institutional taxpayers, also found that 90 percent of Indonesians considered paying taxes to be a “moral obligation” and a way to “help the government”.
“The government needs to address the low level of public trust by ensuring the taxation system is transparent, as people want to know how their money is spent,” said CITA executive director Yustinus Prastowo during an event for the survey’s publication in Jakarta on Friday.
In the survey, 50 percent of respondents said the taxation system lacked transparency, he added.
“The taxation system is deeply related to democracy and transparency. Around 75 percent of respondents said they would pay taxes if [the country’s democracy] worked and [more than] 80 percent would pay tax if the taxation [system] was transparent,” Yustinus said.
To encourage more people to pay taxes, the Taxation Directorate General also needed to conduct effective tax audits, simplify administrative processes and improve tax payment services, he added.
With taxes accounting for just 10 to 11 percent of gross domestic product (GDP) on average in recent years, Indonesia’s tax ratio is one of the lowest among its peers. Several corruption cases involving tax officials have dampened the public’s trust, while the government has continued to increase its tax revenue targets to fund the country’s ambitious development plans.
Tax revenue totaled Rp 1.01 quadrillion (US$72.36 billion) as of October, a slight 0.23 percent increase from the same period last year. The figure accounted for almost 65 percent of the Rp 1.57 quadrillion targeted in the 2019 state budget, the Finance Ministry announced on Monday.
The ministry expects the budget deficit to widen to 2.2 percent of GDP by year-end from an initial target of 1.84 percent. As of October, the deficit totaled Rp 289.1 trillion, or 1.8 percent of GDP, as total state revenue grew sluggishly at 1.2 percent year-on-year (yoy) to Rp 1.5 quadrillion or around just 70 percent of the full-year target.
Newly appointed Taxation Director General Suryo Utomo said on Friday that the government was looking for ways to boost tax collection amid the global economic slowdown that has hampered business growth and the amount of taxes paid.
“The government is currently formulating a law that will make things easier for taxpayers by lowering the income and value-added tax rates to enhance the investment climate in Indonesia,” said Suryo during his remarks.
The government, he added, had already provided several incentives, such as tax holidays and tax allowances, to attract foreign investment. The tax office, meanwhile, is reforming the tax system to adjust to the “changing modes of transactions” to encourage more people to pay taxes.
According to the World Bank’s Ease of Doing Business index, which ranked Indonesia 73rd, the country has made paying taxes easier by implementing an online filing and payment system for major taxes.
The Tempo and CITA survey revealed similar results, with 95 percent of respondents saying they were satisfied with the government’s online payment system, such as e-filing and e-billing.
“Businesspeople are committed to complying with tax [regulations] including tax holidays and tax allowances because the government has already done its best through the omnibus bill,” said Indonesian Chamber of Commerce and Industry (Kadin) tax head Herman Yuwono. “The government should ensure a fairer tax system as many businesspeople feel that it is currently unfair to them.”
The government is deliberating an omnibus bill that will simultaneously amend the General Taxation Law, the Income Tax Law and the Value Added Tax Law.
Finance Minister Sri Mulyani Indrawati urged on Friday taxpayers, including businesspeople, to trust the government.
“When [they] trust the tax institution, they can focus their minds on expanding their businesses and creating added value,” she said. “If they don’t, they’ll be busy trying to find ways around the taxation regulations. That is bad for the economy.”
