Page 10 - Indonesia Taxation Quarterly Report (Q3-2019)

INDONESIA TAXATION QUARTERLY REPORT Q3-2019

policies, laws, and administration) for the OECD’s prescription underlines
taxpayers encourages adequate services increasing voluntary compliance through
that will, in turn, improve taxpayer taxpayers’ greater willingness to comply,
compliance. As a logical consequence, strengthening of administration, and
tax revenue will increase. expanding the tax base.

The Need of Breakthrough At the same time, it is also important
to Increase Tax Ratio to note that there are little evidence
suggesting that a significantly improved
tax revenue mobilization can be
Entering the final quarter of 2019, our
tax revenue performance most likely achieved without being associated with
will not continue last year’s positive a strengthened tax morale of the society.
achievement. By the end of September, In most cases, it can be accomplished
its realization reached only 57,21% of by growing transparency and willingness
APBN target or around 63,1% of 2019 to change ‘cop-and-robber’ perception
tax revenue outlook, noting as little as to a more cooperative collaboration that
0,19% growth from 2018 on the same emphasize equal standing between tax
period. It is much lower than economic authority and taxpayers.
performance in the same period,
reaching 5,02% compared to January- Accordingly, trust-based relationship
September 2018, indicating the tax between tax authority and taxpayers
system could not capture the tax base plays crucial role in reducing costs
growth. from the two sides – compliance and
administrative cost. From taxpayers’
Prior this trend, in 2018, the IMF released side, it will be easier to comply because
its diagnosis and prescription in the they can get certainty about their tax
publication titled ‘Realizing Indonesia’s position. Meanwhile, from tax authority’s
Economic Potential’ with the momentum view, a more opened and cooperative
of the 2018 IMF-World Bank Annual taxpayers enable resource reallocation,
Meeting. On the other hand, the OECD particularly in audit and investigation
revealed its prescription in the ‘Economic process to be more focused on high-risk
taxpayers.
Survey Indonesia October 2018’ along
with the extension of the OECD-Indonesia
Joint Work Program for 2019-2021. To improve tax morale, the taxpayer’s
perception has to be changed first
toward the existing tax system. As
Analyzing Indonesia’s taxation system, broadly suggested, initiatives from the
the IMF offers a prescription framed tax authority, mainly related to efforts in
in the medium-term revenue strategy fulfilling taxpayer’s rights and changed
(MTRS). Through this prescription, the perception of tax authority toward the
tax ratio is projected to rise to 15.4% in taxpayers are the starting steps to
by 2022, to be exact. Additionally, the enlighten them that the tax system is
prescription also aims to reduce tax moving to the right direction.
distortion and strengthen progressivity.
Furthermore, in relation to the changing
tax landscape, we should anticipate
Simultaneously, MTRS focuses on that technological advancement alters
reducing compliance costs and the economic environment in which
improving the investment climate. government seek to collect tax revenue.
Moreover, the IMF seeks to enhance These advancements will make some
people’s perception of justice in persons or transactions easier to tax.
Indonesia’s current taxation system. A But at the same time, they will also
tax system relevant to the dominance make some persons or transactions
of the middle-income population is a harder to tax. For example, it is currently
crucial remedy in the prescription. much harder for tax authorities to track
goods in digitized form than those
that are physically transported across
Based on diagnosis on the same ‘illness’, or between countries. If they are not
the OECD has also offered a relatively well-anticipated, unreported business
similar prescription. This institution sees activities, or shadow economy, will
a potential increase in the tax ratio to increase in the future.
22%. The difference lies in the emphasis,

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