Jakarta. The tax office announced new methods to evaluate the gross income of independent professionals like artists, architects, doctors, lawyers and writers, as well as small businesses.
Under a new regulation, which will come into effect on Feb. 13, the tax office will scour taxpayers' bank accounts and previous tax returns and directly question businesses regarding the number of customers served and items sold, should the office suspect taxpayers of underreporting their taxes.
The tax office will also crosscheck records with that of an individual's or business' clients or suppliers.
While the regulation may seem stringent, it can provide clearer tax guidelines compared to previous practices, which were mostly based on arbitrary valuations by officials — often leading to inconsistent results and opportunities for corruption.
"The old method... often caused disputes," Robert Pakpahan, director general of taxation, said in Jakarta on Monday (05/03).
"The new regulation therefore aims to provide legal certainty in implementing the income tax law," he said.
Under a 2007 tax law, individual taxpayers and businesses are obligated to keep and provide records of their assets, liabilities, capital, income and expenses, as well as sales and purchases, to the tax office. In addition, those below the threshold of Rp 4.8 billion ($336,000) are only required to provide records of their net income.
A 2017 Ministry of Finance regulation also requires banks to report all accounts owned by businesses and individuals that have balances of over Rp 200 million.
Yustinus Prastowo, the executive director of the Center for Indonesia Taxation Analysis, said the new regulation only spells out last options for the officials if a taxpayer does not properly use the already established self-assessment system by not providing complete financial records in their tax returns to the authorities.
"It is not true that tax officers will search to find faults [in tax reports] or use this regulation to look for new taxable objects," Yustinus said in a note.
Yustinus, however, said the new regulation does not clearly define which taxpayers may be deemed "not fully compliant" with already established tax procedures, and that may cause further uncertainty.
Herman Juwono, deputy chairman of the standing committee on taxation at the Indonesian Chamber of Commerce and Industry (Kadin), echoed that sentiment, saying there needs to be a clearer article within the law to establish which individual or business may be classified as "uncooperative."
"Other than that, this is only a regulation for implementation in the field, so we don’t need to worry too much," Herman told the Jakarta Globe.