Amend Your Tax Return Penalty-Free While You Can


NOVEMBER 18, 2017

Jakarta. The government is due to issue a regulation soon that will allow taxpayers to come clean about previously unreported assets without penalties, as long as these have not been investigated by the tax authority, Finance Minister Sri Mulyani Indrawati said on Friday (17/11).

"Those who had joined the tax amnesty program, as well as those who did not, are both encouraged to keep improving their [tax] compliance by revising their unreported assets," the minister said.

Normally, a revision of a tax return has consequences, but for those who did not join the amnesty program, revising their tax returns would mean that they would only have to pay income tax and an additional 2 percent of the unpaid tax per month, up to a maximum of 48 percent.

The Tax Amnesty Law stipulates that taxpayers who joined the amnesty program would face harsher penalties if they are found to still have unreported assets before 2019.

Such unreported assets would be subject to income tax rates of 12.5 percent, 25 percent or 30 percent, depending on the taxpayer's status. The taxpayer would also have to pay 200 percent of the income tax as a penalty.

The upcoming regulation is part of the tax amnesty program's guideline revision, which will also include a clause to ensure tax amnesty participants are exempt from income tax when transferring ownership of houses or land.

The new regulation, which will be a revision of detailed guidelines for the tax amnesty program, has already been signed by the minister and will be issued next week, according to Hestu Yoga Saksama, a spokesman for the Directorate General of Taxes.

Yustinus Prastowo, executive director of the Center for Indonesia Taxation Analysis (CITA), said he had suggested a similar scheme, known as a "second window," in the past as one alternative to improve tax compliance in Indonesia.

"There is a potential moral hazard," Yustinus said. "When does the investigation start? Is it when the tax audit instruction letter has been issued? We do not want the Directorate General of Taxes to use the data as a threat to negotiate with the taxpayer."

Tax compliance in Indonesia remains relatively low.

Of the country's 32.9 million taxpayers – out of a population of more than 260 million – 20.2 million were required to file an annual tax return last year, while only 12.7 million complied.