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Second tax amnesty: How is it different from the first?
The government wants to increase state revenue with a second tax amnesty program just a few years after the first, but critics fear the move will encourage tax evasion.
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Citizens wait for their turn to sign up for tax amnesty at the Taxation Directorate General in South Jakarta on Sept. 27, 2016. The government is offering taxpayers a second chance to come clean about undisclosed assets. (JP/Donny Fernando)
T
o tackle a budget deficit exacerbated by the coronavirus pandemic, the government wants to increase state revenue with a second tax amnesty program just a few years after the first, but critics fear the move will backfire.
The measure is included in a proposed amendment to Law No. 6/1983 on general tax provisions and procedures. The amendment would also introduce a carbon tax, raise the tax rate for high-net-worth individuals (HNWI) and make subject to value-added tax (VAT) several items currently exempted, including staple foods, education and healthcare services.
The government deems the changes necessary to bring the budget deficit back below 3 percent of the gross domestic product by 2023. Failure to do so would mean the government violated Law No. 2/2020 on the pandemic response.
Given the similarities of the proposed second tax amnesty to the first one, the plan has been widely criticized by lawmakers and experts as damaging taxpayers' trust and encouraging tax evasion.
Read also: Indonesia might offer a second tax amnesty. But how successful was the first?
However, Finance Ministry spokesperson Yustinus Prastowo rushed to defend the draft. In an online discussion held by the Narasi Institute on Friday, he insisted, “Actually, it is not the 2016 tax amnesty, but it is a mere voluntary compliance improvement program.”
Yustinus said the new program offered immunity to prosecution but with a normal tax rate, as opposed to the lower rate charged in the first tax amnesty period. He expressed confidence that such treatment would only attract “clean and honest” taxpayers wishing to disclose their remaining assets and comply with authorities afterward.
