Jakarta. A fuss raised by a local author has shed light on Indonesia's unfair tax structure.

Tere Liye, an Indonesian author, announced on Tuesday (05/09) his decision to cut ties with publishers Gramedia Pustaka Utama and Republika Penerbit, effective since July 31 this year, due to a higher tax imposed by the Indonesian government to authors compared to other professionals.

Tere took the matter to his Facebook page, claiming that he will continue writing on his social media accounts, but not through "regular channels," in which he must pay increased taxes. The author estimated that his books will be out of circulation completely by Dec. 31.

"We took this decision due to the tax treatment injustice for authors and the ignorance of the current administration on the subject," Tere said.

Tere made a calculation simulation on his Facebook page, which shows that a writer pays tax twice as much as an accountant, architect, famous actor or a motivator.

"Let's say there are 10 houses, each has the same income of Rp 1 billion [$75,000] a year and we say the non-taxable income of each house is the same, which is Rp 0, to make the illustration simpler," he said.

Based on his calculation, four houses, which consist of a doctor, an accountant, an architect and an actor, have to pay Rp 95 million in tax each year. Meanwhile, another house, owned by a businessman who runs a small to medium enterprise, only has to pay Rp 10 million a year.

"Because a book writer's income is called royalty, so, according to a tax officer, all of his income is considered super net," he said, meaning that the Rp 1 billion a year will not be eligible for any special tariff or the same Net Income Calculation Norm applied for doctors and other professionals.

According to the calculation, the book writer has to pay Rp 245 million a year.

Gov't Response

Tere's announcement — which has been seen by his 3.8 million subscribers — caught the government's attention a day later.

"Revenue that becomes a tax object is any additional economic capacity, so the tax imposed for the net income is based on gross revenue minus the costs to get, to collect and to maintain the income," Hestu Yoga Saksama, the tax office's spokesperson, said in a statement.

According to Hestu, writers whose gross income is less than Rp 4.8 billion a year are eligible to use the Net Income Calculation Norm, meaning only half of his income is deemed taxable.

"The Directorate General of Tax appreciates and is open to any suggestion to improve Indonesia's taxation system [...] but policy-altering decisions will be taken carefully and will be in consideration of all aspects," he said.

Yustinus Prastowo, the executive director of the Center for Indonesia Taxation Analysis (CITA) and who has authored several tax-related books, said the income tax for writers is often already deducted when publishers pay royalties, which usually only occurs twice a year.

The rate at which publishers deduct taxes for authors is often higher than it should be under the Net Income Calculation Norm, Yustinus said. But, writers can only claim tax restitution months later when thy fill their tax returns, creating cashflow problems for the writers.

"Here is where the fairness issue becomes relevant," he said.

Finance Minister Sri Mulyani Indrawati told the media that she is aware of the problem and has asked the tax office to discuss with Tere regarding writers' tax obligations. Still, she added that the government cannot lower the income rate for writers or book royalty rates. That would require changes in Indonesia's tax code, which needs approval from the House of Representatives.