The Financial crisis hit Asia in 1997, but Indonesia suffered the most. While the other countries have emerged from the crisis, Indonesia is still suffering. The Government budget deficit is increasing every year.
The financial and economic crisis in Indonesia creates uncertainty to Indonesians who still have fund, instead of investing it in Indonesia they invest it elsewhere or keep it elsewhere. This capital flight put Indonesia in deeper trouble. Indonesia will be in a better position if the capital comes back to the country. But as you all know, money does not have nationality. It will stay in a safe country that makes it grow.
The Government believes that the tax evasion is still rampant in Indonesia. They benchmark Indonesian tax ration against tax rations of Asian countries and found out that Indonesian tax ratio is the lowest.
The Government believes that the money that is park outside Indonesia is generated from tax evasion.
What is the strategy for bringing the money back?
An intensive tax audit.
The Indonesian Tax Consultants Associations share the believe that the tax evasion is still rampant, but we do not share the strategy of doing an intensive tax audit.
A stable peace and order situation in Indonesia is the most important condition to invite the capital back that in turn will improve the economy. We should stop the political quarrels; we should stop the demonstrations and other actions that disturb peace. These include the peaceful attitude of the Indonesian Tax Authorities. Concentrating on tax audits will scare people, but will not bring enough results.
We believe that the best thing with regards to taxation in Indonesia is voluntary tax compliance. To achieve this, we have to improve many areas: tax administration, tax officer’s attitude and tax awareness of the taxpayers. But we have to start somewhere. Therefore, in January last year, the Indonesian Tax Consultants Association proposed an issuance of a Tax Amnesty Law to the Parliament and to the Government. We did not only propose, we also drafted the law.
Our general ideas are as follows:
- The taxpayers who believe that they have not paid tax accordingly in the past may declare their actual wealth as per December 31, 2001
- The portion of the wealth that is obtained without paying proper tax is subject to amnesty tax between 1% and 10%
- By paying this amnesty tax, the taxpayer is free from any past tax sanctions
- Starting 2002 they should pay tax according to the law, otherwise the will be severely penalized.
Our proposal did not get favorable response from the parliament as well as from the Directorate General of Taxation.
The Parliament said that the amnesty tax rate is too low for corruptors. The Directorate General of Taxation said, based on their communication with several countries, that tax amnesty does not bring any good result. They enjoy going after tax evaders with intensive tax audit.
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