Marcell Sihombing, M. Agus Yozami/ANT
Illustration by: BAS.
As we enter the third and final period of Indonesia’s current tax amnesty, the government is currently busy preparing the next step of its overall tax-reform agenda. Indeed, the government recently established a tax-reform team through the issuance of Ministry of Finance (Ministry) Decree No. 885/KMK.03/2016, as well as a customs-and-levy reform reinforcement team through the issuance of Ministry Decree No. 909/KMK.04/2016.
According to Minister of Finance, Sri Mulyani, these new teams have been established in order to allow the tax-administration authority and customs-and-levy administration authority to effectively oversee state revenue, and also to ensure that the services that they provide are undertaken with the utmost integrity. Moreover, Minister Mulyani has also revealed that these teams will also be preparing for and supporting the implementation and reinforcement of a reform agenda which encompasses various aspects relating to the country’s institutions, human resources, budgeting, regulatory frameworks, databases, business processes and utilization of information technology.
Mrs. Mulyani has also claimed that the establishment of the tax-reform team may ultimately lead to the improvement of taxpayer compliance, greater trust in Indonesia’s tax administration and database management, as well as improvements to the productivity and integrity of the tax-administration authority’s personnel.
Darussalam, a tax expert at the Danny Darussalam Tax Center (DDTC), recently passed comment on this issue and stated that the focus of the taxation system for this year should be placed firmly upon establishing a strong foundation for Indonesia’s tax-reform agenda. In this regard, Mr. Darussalam believes that the success of the government’s overall tax-reform agenda lies in the simplification of the current taxation framework.
“It is impossible for any program of tax-reform to offer legal certainty without a simplification of the taxation framework. Thus, in the future we will be pushing hard for the reformation process to shift its focus to the issue of regulatory simplification,” Mr. Darussalam stated during an address that he gave at a recent tax discussion event held at the University of Indonesia’s Salemba Campus on Monday, 9 January 2017.
Mr. Darussalam went on to further explain that the simplification of the taxation framework may take the form of a reduction in the various administration costs involved in the collection of taxes, as well as taxpayer-compliance fees.
While highlighting that the tax-amnesty program represents an important first step in an overall program of comprehensive tax-reform, Mr. Darussalam also stressed that Indonesia’s efforts towards tax-reform should continue with a total redesign of the current taxation system in order to guarantee the sustainability of state revenue and to minimize taxation disputes in the future.
“Thus, a new paradigm is needed, [and that is] a tax-compliance framework which is based upon an enhanced relationship, more popularly known as ‘cooperative compliance’,” Mr. Darussalam stated.
Continuing his address, Mr. Darussalam explained that this new paradigm would require a relationship that was built upon transparency, participation and a straightforward approach, as well as mutual trust and understanding between taxpayers, the tax-administration authority, and tax consultants. As a result of these measures being implemented, it should be possible to promptly identify any taxation disputes which may arise and address them before they become a serious problem.
Awan Nurmawan Nuh, an expert working at the Taxation Laws Enforcement and Regulatory Division at the Ministry, has also revealed that the focus of the Ministry’s taxation framework for the 2017 period involves improvement being made to the overall level of tax compliance, as well as to the performance capacity of the Directorate General of Tax (DJP).
According to Mr. Nuh, this focus has been triggered by the low level of taxpayer compliance, as well as by the DJP’s problematic performance capacity. Indeed, Mr. Nuh has revealed that the tax-amnesty program was introduced in a bid to overcome these issues, in addition to the obvious objective of accessing fresh sources of funding for the government.
Mr. Nuh has also admitted that the low level of compliance demonstrated by the country’s taxpayers represents a substantial challenge to the Indonesian state. Referencing data generated during the tax-amnesty program’s second period, Mr. Nuh has claimed that only 3% out of a total of 20 million taxpayers were required to file an annual notification letter (surat pemberitahuan tahunan
) stating their participation in current the tax-amnesty program.
As a result of all this, Mr. Nuh has confirmed that in addition to optimizing its efforts during this final tax-amnesty period, his institution [the Ministry] would also be seeking to intensify and extend the utilization of any data generated during the implementation of the tax-amnesty program.
“Generally speaking, our focus is on how to optimize the utilization of [the generated] data in order to improve compliance levels, while also reforming the DJP itself at the same time,” Mr. Nuh stated.
In terms of this organizational reform of the DJP, Mr. Nuh has stressed that a discourse is currently being pursued as regards the implementation of different standards for each of the tax offices located across Indonesia, as it has become clear that each region possesses different economic features, characteristics and potentials.