Page 10 - Indonesia Taxation Quarterly Report (Q1-2020)

INDONESIA TAXATION QUARTERLY REPORT Q1-2020

and professionalism play crucial role required World Health Organization
to ensure that there are no room for (WHO) to raise its status to a pandemic.
corrupted transaction. Tax morale and The adverse consequences of this
awareness to comply the law will be pandemic are significant, including
instrumental in succeeding this business the disruption of global supply chains,
process. weaker demand for imported goods
and services and the major declines in
Another instrumental –and can be hospitality (tourism and travel) industries.
mentioned as fundamental– pre- Consequently, OECD predicted the world
condition for this approach is the quality economy to experience a shortfall from
of data collection. This aspect will be 2,9% to 2,4%.
crucial when the DGT is going to use
advanced analytics for risk detection The COVID-19 crisis also has major
and use of new information sources implication for public budgets. In the
in monitoring and evaluation. Gaining context of Indonesia, heavy pressure
taxpayers’ trust from earlier would help already began in February, when Ministry
creating compliant habit regarding of Finance stated that the deficit of the
their tax obligation. Thus, in result, State Budget reached Rp62.8 trillion.
supervision and quality performance The decline of oil and gas tax revenue
can be improved. is influenced by the fall of world crude
oil prices due to declining of oil demand
It can be concluded that participation in the COVID-19 period. As for the non-
from taxpayers is key to create more oil and gas tax revenue downward
sustainable and taxpayers’ friendly movement was partly due to increased
tax system. Consequently, trust from restitution due to the impact of COVID-19.
taxpayers are seen as the main factor to
preserve the legitimacy of the tax system. The Ministry of Finance has estimated
According to OECD, tax administration that Indonesia’s economic growth to
is the determining factor whether reach 2.3% in the severe scenario and
taxpayers can trust the tax authority or increase to -0.4% in the very severe
not. In turn, it would certainly affect the scenario. The ministry also stated that
taxpayers’ morale, which encompasses state revenues would decrease by at
the decision for the taxpayers – whether least 10% due to tax incentive support,
they are going to voluntarily comply or lower income tax rates and commodity
not. prices fall.

In response to this, a framework which In response to this, the Government of
they can offer transparency in exchange Indonesia has launched at least seven
for assurance is needed. The OECD tax policy responses (excluding excise
framework can be used as a reference and customs) to date. The tax policy
for the development of this approach in response are tax payment and tax return
Indonesia. The trust-based framework deferral, CIT rate reduction, VAT refund
between tax authority and taxpayers - or acceleration, exemption of import
simply called cooperative compliance - withholding tax (Income Tax Art. 22),
has now been started to be implemented PIT (Income Tax Article 21) borne by
in at least 17 countries in Asia and 37 government, 30% deduction of Income
OECD countries. Tax Article 25, and introduction of digital
tax.
Global Tax Policy
Responses to COVID-19 These efforts are actually on the same
path as other countries have been
Crisis performing. DDTC Fiscal Research
recorded, as per 31 March 2020, there are
In the first quarter of 2020, the world has at least 113 economies that have utilized
started to experience the outbreak of an (or going to utilize) their tax instrument
infectious disease called coronavirus, as a response to this threatening
or COVID-19. The rapid escalation of situation. Majority of the countries that
COVID-19 to all corners of the world, have given tax-measures response

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