Indonesia: Big job awaits tax office despite ‘moderate’ 2018 target – 18 Aug 2017

  • The Ministry of Finance’s Directorate General of Taxes will have to revamp its customer service, simplify procedures and improve surveillance to help it collect more taxes in 2018.
  • President Joko “Jokowi” Widodo unveiled the proposed 2018 state budget on 16 Aug 17, which is based on the assumption that tax collection increases 9.3% compared to the target in the revised 2017 state budget.
  • 2017’s tax collection target is nearly 15% higher compared to 2016’s realization of IDR1,285tr. Yustinus noted that the government still has homework to do in terms of taxation, such as improving communication to provide better customer service and make taxpayers feel like partners instead of subordinates.
  • He said this is important because Indonesia uses a self-assessment system where taxpayers are responsible for calculating, paying and reporting their tax liabilities themselves. The government also has to establish clear procedures to help taxpayers understand both their obligations and rights.
  • The easier taxpayers can fulfill their obligations, the more likely they are to do so. The implementation of tax laws still depends largely on the discretion of individual tax officials, which creates a sense of uncertainty among taxpayers when dealing with the tax office, he said.
  • Yustinus said he found several cases where tax offices declined requests for income tax exemptions where taxpayers changed their names for land ownership purposes – lawful in the case of an inheritance or a grant – just because the office did not want to miss out on the collection and thus fail to meet its revenue target.
  • He said an additional effort to collect taxes involves location-based surveillance and law enforcement strategies in the wake of the tax amnesty. At the Jakarta Special Regional Tax Office, officials thoroughly examine each foreign company seeking to invest in the country, while officials at the West Java Regional Tax Office implemented a geotagging system.
  • Despite 2018’s higher target and slow collection so far in 2017, the tax office remains optimistic of fully achieving its target as set out in the 2017 revised state budget, a senior tax official said.
  • The government’s tax collection in 2017, at IDR601.1tr as of end-Jul 17, includes income tax from the oil and gas sector but excludes the proceeds from customs and excise. This amount is 12.4% higher y/y compared to 2016’s realisation in the same period. However, this is only about 47% of the 2017 target set out in the revised state budget.
  • Hestu Yoga Saksama, spokesman for the Directorate General of Taxes, bases his optimism about meeting 2017’s target on rising commodity prices and higher oil and gas prices compared with 2016.

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