Jakarta. The Ministry of Finance's Directorate General of Taxes will have to revamp its customer service, simplify procedures and improve surveillance to help it collect more taxes next year.
President Joko "Jokowi" Widodo unveiled the proposed 2018 state budget on Wednesday (16/08), which is based on the assumption of collecting Rp 1,609.4 trillion ($120.45 billion) in various taxes and customs and excise next year. This amount represents a 9.3 percent increase compared with the target in this year's revised state budget.
This year's tax collection target is nearly 15 percent higher compared with last year's realization of Rp 1,285 trillion.
"Overall, the tax target for 2018 is more moderate and realistic," said Yustinus Prastowo, executive director of the Center for Indonesia Taxation Analysis (CITA).
Yustinus noted that the government still has homework to do in terms of taxation, such as improving communication to provide better customer service and make taxpayers feel like partners instead of subordinates. He said this is important because Indonesia uses a self-assessment system where taxpayers are responsible for calculating, paying and reporting their tax liabilities themselves.
"Lately, [the tax office] made rules that make it appear as though it does not trust taxpayers. For example, anyone submitting a tax report [on behalf of another person] is required to present a letter from an attorney. [...] [The rule] is good as a control measure, but the way they implemented it [was bad]," Yustinus said.
The government also has to establish clear procedures to help taxpayers understand both their obligations and rights. The easier taxpayers can fulfill their obligations, the more likely they are to do so.
The implementation of tax laws still depends largely on the discretion of individual tax officials, which creates a sense of uncertainty among taxpayers when dealing with the tax office, he said.
Yustinus said he found several cases where tax offices declined requests for income tax exemptions where taxpayers changed their names for land ownership purposes – lawful in the case of an inheritance or a grant – just because the office did not want to miss out on the collection and thus fail to meet its revenue target.
He said an additional effort to collect taxes involves location-based surveillance and law enforcement strategies in the wake of the tax amnesty.
At the Jakarta Special Regional Tax Office, officials thoroughly examine each foreign company seeking to invest in the country, while officials at the West Java Regional Tax Office implemented a geotagging system.
"Such practices have helped to increase the number of new taxpayers several fold, thereby raising the tax collection aggregate," Yustinus said.
Despite next year's higher target and slow collection so far this year, the tax office remains optimistic of fully achieving its target as set out in the 2017 revised state budget, a senior tax official said.
"Still optimistic," Hestu Yoga Saksama, spokesman for the Directorate General of Taxes, told the Jakarta Globe.
The government has managed to collect Rp 601.1 trillion in taxes as of the end of July. This includes income tax from the oil and gas sector but excludes the proceeds from customs and excise. This amount is 12.4 percent higher compared with the realization in the corresponding period last year.
However, this is only about 47 percent of the target set out in this year's revised state budget.
Hestu bases his optimism about meeting this year's target on rising commodity prices and higher oil and gas prices compared with last year.
"On the taxpayers' side, awareness of the need to pay tax has also increased, especially among those who joined the tax amnesty program," he said.