The new director general of the Finance Ministry's tax office, Ken Dwijugiasteadi, left, shaking hands with Minister Bambang Brodjonegoro. (Antara Photo/Ahmad S.)
Interview: Indonesia's New Tax Director Sees No Problems, Only Solutions
BY :TABITA DIELA
MARCH 26, 2016
Jakarta. The new director general of the Finance Ministry's tax office, Ken Dwijugiasteadi, faces an uphill battle to meet the huge tax revenue target the government has set for him this year.
At Rp 1,360 trillion ($104 billion), this year's tax revenue target is 28 percent higher that last year's realization, which would be an achievement not seen since 2009, when the government forwent fines on back taxes.
The government would like to try a similar approach this year — a tax amnesty bill is being discussed by lawmakers — even as slow economic growth and low global commodity prices continue to pressure tax revenues.
But Ken, a veteran with 23-year experience in the tax office, shows the least amount of concern, stressing that he doesn't believe in problems, only in solutions.
And one of those solutions is to improve taxpayers' compliance, especially high net worth individuals whose wealth is becoming more and more difficult to hide thanks to the tax office's cooperation with intelligence agencies and tax authorities in other countries.
Ken is making long days, not leaving the office until late at night.
Even when he agreed to meet the Jakarta Globe for an interview last week, the appointment was at 10 p.m. He had just finished a meeting with other directors general and their deputies at the Media Hotel & Towers in North Jakarta. His staff said Ken had another meeting planned for 5 a.m. the next morning.
Question: The Tax Amnesty bill, which is being deliberated at the House of Representatives, is hoped to improve the tax office's data and bring home assets of Indonesians stashed abroad that are worth trillions of rupiah (hundreds of millions of dollars). However, there have been accusations that the tax amnesty will only benefit tax dodgers. What is actually the importance of a tax amnesty?
Answer: This is not the first tax amnesty initiative in Indonesia. This is the third after those in 1964 and 1984. Tax amnesty has become the need of taxpayers and it would not only benefit the government's tax revenue. If we look at a bigger scale, a tax amnesty will be good for the economy. When Indonesians repatriate their assets back home, invest in Indonesia, this would create new tax objects and new job opportunities. It would reduce the gap between the poor and the rich. The most important part is that Indonesia's economy can be supported by its own people. That is very important. With a tax amnesty, we could expand the tax base. Indonesia could improve its revenue source. That's all.
Q: So, it is true that tax amnesty is meant specifically to get Indonesians whose assets have been parked overseas to bring these back home?
A: A tax amnesty is meant for anyone, including those who already have and those who haven't had the tax identification number yet. Every Indonesian is been given the same right. Even you could join the initiative. Actually, it's not about luring or not luring them, but it's important for the economy as a whole. It's important for the investment, to give people jobs, to reduce unemployment.
Q: What if the money was, say, the proceeds of a crime?
A: Tax only knows that income is anything added to one's economic capability. We don't actually recognize whether is a 'good' money or 'bad' money. We only give a pardon for back taxes, not the crime.
Q: The tax amnesty might not pass, as the House has postponed talks on the bill. Does that we will be looking at a massive tax collection shortfall this year?
A: We can't say anything before the bill is through. We can't even set the tariff just yet. We are still waiting for the House of Representatives. Who said that [a tax amnesty would potentially bring home Rp 60 trillion]? If that came from the news, well, that did not come from us. The Directorate General of Taxes, according to the law, has three main duties. The first is to educate taxpayers. Second is to conduct research, which includes intensification and data searching. The third one is surveillance, which includes gijzeling – the Dutch term for detention [until tax obligations are met]. Whether the tax amnesty is through or not, we will still have these duties. Tax Amnesty [law] and the Tax Law are two separate regulations.
Q: So, even without the tax amnesty bill, the Directorate General of Taxes is confident that it would reach the Rp 1,360 trillion target set for this year? That is 28 percent higher than last year's tax revenue realization of Rp 1,060.85 trillion.
A: Yes, of course. We are merely a policy executor. We're not the policy maker, so we ought to work. Sure, we are optimistic. If you ask whether we are optimistic, God willing, we are. The natural growth of tax is a combination of economic growth and inflation. Say our economy grows at more than 5 percent and inflation is 4 percent. We have 10 percent growth this year. If I can pull an extra effort of 5 percent, the tax should grow 15 percent more than last year's [realization]. According to our 3 percent extra effort last year, we might grow 13 percent this year.
Q: What do you think will become the biggest obstacle for tax revenue this year?
A: We have solutions. I always think about solutions. Solutions, solutions, solutions. So, it's not the problems that scare me. It's the fear that makes it hard for us. So, it's better for me to always think about a solution.
Q: You said earlier outside this interview that you are specifically targeting the major would-be taxpayers with a huge net worth. How can you identify them?
A: I have their data and how much they are worth, but I don't know where they put their money. Indonesia's banking law prevents us from knowing. We have bank secrecy here. We have access from the exchange of information among OECD countries, between tax offices. They give this information to us. We, too, will give them any data we have about foreigners.
Q: Did you receive the data from Indonesia's State Intelligence Agency (BIN)? Has the cooperation with BIN been fruitful in the past year?
A: Yes, the cooperation was effective because BIN has the duty to guard the national economy. Look, we can tax something if we have a taxpayer and if we have a tax object. We must first reveal who the subjects are and what the objects are as well. If you ask for the potential, I must ask who the subject is and what the objects that would give us the potential. Each object has a different tariff. Stocks, for example, have different tariff than land and building right acquisition. We can't just put a 10 percent tariff on everything. We can't.
Q: How much is the potential that you've recorded from your collaboration with the intelligent services? Is there any number you could share?
A: Potential, surely, has a number. When someone tipped something, then I'm looking for the subject, the object and the tariff. We'll figure out how we will impose the tax and how will they pay the tax. The way they pay the tax is very important. For example, someone who imported something is subjected to import duty and import VAT. Who imposes the tax? It's the Directorate General of Customs and Excise. We will only need to wait for their report.
Q: Doesn't our banking law actually allow the tax office to acquire taxpayers' data from the bank?
A: We can't access a banking customer's savings account. A customer's loan, on the other hand, is accessible. Credit cards, personal loans, I can ask for that but currently I can't access savings data. We will be able to access the savings data for tax necessities in the new banking law […] The point is, there will be the free exchange of data in 2018. Every country, including Indonesia, will open its data on taxpayers.
Q: Wouldn't this the automatic exchange of information cause panic among Indonesians?
A: Why would it cause panic? Everyone has their own responsibility and authority. Nobody can leak the data. It is still protected by the law. For health-related data, for example, only doctors and his or her clients can access it. Data openness, especially for the Directorate General of Taxes, is of course only related to tax potential, such as tax objects, taxpayers and the manner of imposing the tax. I can't deliberately raise accusations if someone, for example, is frequently going back-and-forth between Jakarta and Surabaya because he is cheating on his wife. That's not how it works.
Q: You seem to rely much on global data openness. Do you have any projection or target in relation to this?
A: You mean the prediction? Well… I can't see the future, but Finance Minister Bambang Brodjonegoro had said before that if the money comes to Indonesia – from the former tax dodgers who parked their assets abroad – then the economy will improve, investment will grow and jobs will be created, as will purchasing power, and unemployment drop and new tax objects will be created.
Q: Following technological developments is interesting. What has the Directorate General of Taxes done so far in this field and what will it do?
A: I hope this year our IT will be more integrated. It had to be integrated. For example, it is easier now to report tax return through e-filing.
Q: How can such electronic filing boost tax compliance?
A: Once everything is integrated, just like in Putrajaya, Malaysia, even the president can access any tax data-related information. I want to have Indonesia Multimedia Super Corridor here. It would be much like what Malaysia has, like an integrated big data set. Every taxpayer move would be known. We can tap to know his account, his identity, even his blood type. Much like the American version of SIN — Single Identification Number […] — We have meetings, discussions. We already have the hardware. We also have other initiatives like geo-tagging and cooperation with the police. If you want to register your vehicle, the police will ask for your tax registration number.
Q: Do you think you have enough manpower to implement all these changes at the Directorate General of Taxes?
A: It's not about an ideal number or otherwise. Honestly, I think we need more [tax officers]. Despite all the technologies, we need humans to do the job. Indonesia's middle class has reached 129 million people and only 27 million are registered as taxpayers. The Directorate General of Taxes only has 4,551 tax intelligence officers and investigators. One time we opened recruitment for 2,000 positions, we received 135,000 applications. Our manpower now totals 38,500 people who mostly, 80 percent to be exact, are born in the 1980s. All of them are the Y-generation. [...] Their time is different than mine. I used to go home early to eat dinner with my family. Kids nowadays are different. They also don't like complicated bureaucracy. This habit becomes ours. We don't like bureaucracy.
Q: But taxes are complicated with all those codes and regulations. It's not only about manners. So are you planning to simplify regulations and the tax codes?
A: Well, no. All we need to do is keep educating people. It's indeed hard for civilians to understand tax regulations, but we will routinely educate them in every day and every hour.
Q: There are things you can't change, but you said you'll change some of the tax laws. Any progress?
A: We should finish the Tax Amnesty bill this year and the General Tax Provisions and Procedures Law as well. We also have a Stamp Duty Law, a Value-Added Tax Law, a Land and Building Tax Law to be discussed in near future. We hope this year it will all be ready.
The interview with Ken Dwijugiasteadi was conducted in Indonesian. Answers have been translated and edited for clarity.