Individual taxpayer compliance as of the March 31 tax return submission deadline stood at 66.7 percent in 2023, almost unchanged from 66 percent logged by the deadline a year earlier, according to tax news portal DDTC News.

Compliance of nonemployee individuals plummeted to 26.84 percent as of March 31 from 45.53 percent last year, Kontan reported on Sunday.

Bhima Yudhistira, director of Jakarta-based think tank Center of Economics and Law Studies (CELIOS), told The Jakarta Post on Monday that the trend may have been affected by recent cases that resulted in a probe of the high-level tax officer.

“Submission of individuals’ tax returns, especially nonemployee individuals, definitely depends on how much they trust the tax office,” Bhima said.

He added that the government ought to conclude taxman cases to retain taxpayers’ trust, saying that dragging the cases out too long may further hurt compliance, both with regard to the tax return submission deadline and with declaring all taxable income.

“This could affect our tax collection as well,” Bhima said.

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In Indonesia, several taxes are dealt with by third parties, such as employee income tax, which employers deduct from salaries and pass on to the state, but there are others that require taxpayers themselves to make the cut and pay directly to the state, as is the case with self-employed people.

According to 2021 data from the Finance Ministry’s Directorate General of Taxation, individuals make up the lion’s share of 92.74 percent of registered taxpayers in the country, followed by corporate taxpayers with 5.94 percent.

Prianto Budi Saptono, executive director at Pratama-Kreston Tax Research Institute (TRI), told the Post on Monday that he had met with several taxpayers during tax return submission training events and that many had voiced disappointment over the recent cases, which had led some of them not to file their tax returns.

Not submitting one's tax return may backfire, he said, as taxpayers could be fined or even get investigated for any possible violations.

For the government, this can also incur costs, because when fewer taxpayers comply willingly, tax officers need to enforce compliance, which is costly for the state.

As the tax office focuses on investigations and in-depth examinations of particular taxpayers’ records and data, fewer government resources are available to work on expanding the tax base, such as by identifying and registering should-be taxpayers.

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Furthermore, taxpayers failing to submit tax returns also deprives the tax office of the starting point for discovering cases of underpayment, especially for self-employed taxpayers or those relying on informal sources of income.

Yon Arsal, the tax compliance assistant to the finance minister told the Post on Monday that the overall compliance level, including corporate taxpayers, stood at 61.8 percent, which he said was more or less the same level as last year.

He noted that the percentage of taxpayers filing their returns could still move up throughout this year, as the office still accepted tax return submissions after the deadline.

“Until the end of this year, we aim to get 83 percent of overall compliance,” Yon said.

“As we see it, everything is still on track,” he added.

— Editor's note: This article has been updated with the information provided by the Finance Ministry’s Directorate General of Taxation.

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