In Tax ‘Reinventing’ Policy, a Third-Rate Second Choice
Jakarta. A tax policy expert has slammed as ineffective the government’s so-called reinventing policy that waives fines for delinquent taxpayers, citing it as yet another reason why the tax office will fall far short of its revenue collection target for the year.
Under the policy rolled out by the administration of President Joko Widodo, individual taxpayers are exempt from paying fines on missed payments, as long as they agree to amend their filings from 2009 to 2014.
The reinventing policy is similar to the sunset policy of the Susilo Bambang Yudhoyono administration, introduced in 2008, to boost tax collection and the taxpayer base. But the problem this time around, says Yustinus Prastowo of the local policy think tank Center for Indonesia Taxation Analysis (CITA), is that reinventing “has a late start.”
“It doesn’t have a strong incentive and the public has already heard about the tax amnesty issue, which is more attractive,” he said.
“If you liken the tax amnesty to the iPhone 6, then the reinventing policy is like a cheaper version of the high-end gadget,” he added.
Shot down
Joko’s administration has struggled to work out the right policies to boost tax collection, which accounts for the bulk of state revenue.
As of Dec. 12, the Finance Ministry’s tax office has collected less than 70 percent of its full-year target of Rp 1,294.3 trillion ($92.3 billion), and is almost certain to miss its goal.
Low revenue will widen the budget deficit, which must, by law, be maintained below 3 percent of gross domestic product.
To close the gap, the government has introduced a controversial tax amnesty program, under which it will charge 1.5 to 6 percent tax – the final figure is still being determined – to tax evaders who opt to disclose their true assets.
The government submitted a bill on the amnesty to the House of Representatives, but legislators decided on Tuesday that the bill would go into the docket for next year’s raft of legislation instead of this year’s.
A large part of the House’s reluctance to rush the bill into law is the concern that it effectively legitimizes the past actions of tax cheats. Proponents, though, say this is a good thing, and will allow for the repatriation of funds stashed abroad, especially in Singapore.
“It’s impossible to ratify [the tax amnesty] this year,” Fadel Muhammad, the chairman of House Commission XI, which oversees financial affairs, said on Tuesday. “We haven’t seen the final concept from the government.”
He added he was skeptical about the additional Rp 60 trillion to Rp 100 trillion in tax revenue the government claims would be raised through the policy.
Mekar Satria Utama, a spokesman for the tax office, said that without the tax amnesty initiative, the government would have to rely on other initiatives, including the reinventing policy, asset revaluations and an anticipated surge in revenue from value-added taxes on goods and services during the Christmas and New Year period.
“We can still try our best to achieve 85 percent of the target,” he said.
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