Page 8 - Indonesia Taxation Quarterly Report (Q1-2019)

Executive Summary

to obtain data and information to map competitiveness amidst economic
tax compliance while in fact, data and uncertainty. Third, the protection of the
information are crucial specifically in tax base and the era of transparency.
the context of digital economy often Fourth, the protection of taxpayers’
referred to by the OECD (2017) as the rights and certainty. Fifth, increasing
new shadow economy. compliance through simplification. Sixth,
a new paradigm to ensure compliance.
The absence of the obligation to collect Seventh, digital economy.
transaction and identity information may
lead to difficulties for the government to Tax reform in various countries covers
expand the tax base whereas we know several aspects. First, the corporate
for a fact that e-commerce transactions income tax. In this area, there exists a
in Indonesia are of great value and trend of decreasing corporate income
are predicted to continue to escalate. tax rates, special SME tax treatment,
OECD (2019) also argues that digital provision of tax incentives, changes to
platforms can play a crucial role in tax the hybrid territorial tax system, special
compliance, specifically VAT, in terms taxation for multinational companies,
of cooperation in providing information and taxation of the digital economy.
to the tax authorities, tax collectors and
depositors, as well as those who educate Second, individual income tax. In this
merchants on their platforms. aspect, there is an overhaul of the
personal income tax structure through
On the other hand, digitalization should rate adjustments and tax brackets,
not always be viewed negatively in the provision of reliefs for low-income
tax area. In terms of tax administration, residents, provision of incentives for
the application of technology and human resources (HR), and adjustment
digitalization is generally carried out of income tax on passive income from
through electronic-based reporting, more capital.
efficient data collection and processing,
information services, reduced errors, Third, value added tax (VAT). There are
and improved fraud detection. The several tax reform trends concerning
digitization process has resulted in VAT, such as the increase in standard
efficiency, real-time communication and rates, expansion of bases, administrative
interaction, and transparency. These reform to prevent leakage, and
three elements will indirectly result in improvement of VAT compliance on
increased tax compliance. international trade transactions. Fourth,
excise and other taxes. This aspect
includes the increase in excise rates for
Tax Reform Agenda products that are hazardous to health,
extensification of the objects of excise,
The direction of tax reform in a country imposition of environmental and wealth
may not necessarily be interrelated taxes.
to solve problems in other countries.
However, the knowledge of the tax To ensure the success of tax reform,
system in other countries is crucial. This the government needs to establish a
is due to the fact that the interactions design and framework for a rational tax
between tax systems are increasingly reform that has strong political support.
inevitable in the context of globalization. As it is carried out systematically and
However, tax reform must be understood gradually, administrative feasibility
as a means to bring the system as determines the effectiveness of the tax
close as possible to the most ideal and reform implementation. As such, the
balanced direction (second best policy). reform must also be transparent and
participatory.
It must at least be understood that the
trend of tax reform in various countries Interestingly, the majority of tax reform
in the last five years have been triggered in various countries is more focused
by a number of factors. First, the on efforts to improve competitiveness.
collection of revenue. Second, driving

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