Businessmen welcome Indonesia’s tax amnesty plan

The Indonesian Employers Association (Apindo) has welcomed the government’s plan to introduce a tax amnesty, a fiscal incentive expected to encourage individuals or corporation that have not fully paid their taxes to comply with tax regulations.

The association’s deputy chairman Hariyadi Sukamdani said that the amnesty would be effective in improving tax compliance because those who had not paid their taxes would be freed from any penalties.

“President [Joko] Jokowi [Widodo] should implement the tax amnesty within the next couple of years, even though the political situation is a little difficult right now,” he added.

Hariyadi said that Indonesia should learn from the success of Italy in implementing the tax amnesty in 2003. According to him, with the tax amnesty, Italy could attract a repatriation of funds worth 80 billion euros (S$122 billion) from Switzerland.

Mandiri Institute executive director Destry Damayanti, however, said it would not be easy for the government to introduce the tax amnesty because its implementation would require a long process of assessment both legally and politically.

“If its purpose is to revive business activities, it would be better for the government to provide tax incentives to boost exports and to avoid double taxation,” she said, citing that investors were more comfortable to issue notes in Singapore or Malaysia, because the tax systems in the two neighbouring countries were more “friendly”.

Previously, Finance Minister Bambang Brodjonegoro said there would be a revision to the General Taxation System (KUP) Law that would include a tax amnesty waiving administrative penalties and prosecutions for non-compliance in exchange for registration and subsequent honest and accurate tax reporting.

Commenting on the government’s plan to increase tax revenues in the proposed revision of the 2015 State Budget, Indonesian Chamber of Commerce and Industry (Kadin) chairman Suryo Bambang Sulisto said the plan would be counterproductive because most of the country’s business sectors were on the decline as a result of the global economic slowdown.

The proposed increase in the country’s tax revenues would be “unrealistic” and “counterproductive” for the business world, he said, and should instead be supported through fiscal incentives.

“As taxpayers who contribute the largest portion of tax revenues, we support the government’s vision and we are not anti-tax. However, we think the revenue increase should be achieved through logical and realistic ways,” he said at a press conference on Wednesday.

The government has proposed that the targeted tax, customs and excise revenues in the revised 2015 State Budget would be Rp 1.48 quadrillion (SS$158 billion), an increase of 40.3 per cent from Rp 1.05 quadrillion in realised revenues last year.

Last year’s realised revenues from tax only – excluding customs and excise – reached 91.7 per cent of the state’s annual tax revenue collection goal of Rp 1.24 quadrillion.

Meanwhile, the targeted tax amount this year comprises Rp 1.24 quadrillion in non-oil and gas revenues, Rp 188 trillion in customs and excise and Rp 55.5 trillion in oil and gas income tax (PPh).

The discussion on the revised state budget between the Finance Ministry and the House of Representatives is still ongoing and expected to be completed by Feb. 13.

Suryo said the tax revenue increase was good news amid economic slowdown at the domestic and global level as well as various other challenges faced by business owners, such as complicated bureaucracy and permit processing.

According to Suryo, the government should arrange a clear “tax road map” in raising tax revenues.

“We think tax extensification is more important than intensification. There are still many untapped sectors in taxation, so it will be better if tax is lowered but the revenue volume will still increase due to wider sources from various sectors,” he said.

Apindo’s Hariyadi said the government should instead offer tax incentives for business owners because it actually had much wider fiscal space after reallocating fuel subsidies.

However, Hariyadi said the government had forced new tax regulations in several sectors, such as property, retail and shipping, to reach this year’s revenue goals.

“For instance, the plan to change the category of very-luxurious goods from Rp 10 billion to Rp 2 billion will also affect the category of luxurious goods,” he said. –