BERITA TERKINI
JAKARTA, DDTCNews - Taxpayers are expected to confront increasing complexity and uncertainty in the tax system this year.
Director of DDTC Fiscal Research & Advisory, Bawono Kristiaji, noted that the tax complexity and uncertainty tend to amplify amidst the fiscal pressures faced by the government.
“When fiscal pressure increases, complexity also rises. This affects compliance costs and the extent to which compliance can be ensured. In times of heightened fiscal pressure, what we need are measures that facilitate compliance,” Bawono stated during Indonesian Legal and Economic Outlook 2025, hosted by the Perbanas Institute on Thursday (27/2/2025).
One of the key drivers of tax system complexity, he explained, is the sheer volume of regulations issued each year. DDTC Fiscal Research & Advisory records indicate that, on average, around 100 new tax-related legal products are issued annually by the government, ranging from laws to director general regulations.
For instance, in mid-2023, the Ministry of Finance issued MoF Reg. 66/2023, which stipulates the imposition of income tax on in-kind and fringe benefits received by employees or service providers. Shortly thereafter, by the end of 2023, the Ministry of Finance issued MoF Reg. 168/2023, which significantly revised the methodology for calculating Article 21 income tax on employees’ income.
The rapid issuance of regulations within short intervals requires taxpayers to quickly understand and adapt to new rules, often within limited timeframes.
Beyond complexity, taxpayers also face uncertainty arising from the current tax system, particularly in areas such as VAT refunds and tax dispute resolution.
According to data from the World Bank, approximately 70% of the 2,955 surveyed entrepreneurs are reluctant to claim VAT refunds due to complex procedures and lengthy processing times.
“When we see that 70% figure, it suggests that corporate cash flows in Indonesia may be under strain, as VAT refunds that should rightfully belong to taxpayers remain held by the state. This also signals the uncertainty generated by the tax system for businesses,” Bawono explained.
In terms of dispute resolution, data from the Supreme Court (Mahkamah Agung/MA in Indonesian) indicates that the productivity ratio of the Tax Court in resolving cases has remained relatively low in recent years.
In 2023, the Tax Court’s case resolution ratio stood at only 60.81%, with 16,223 cases decided out of a total caseload of 26,678.
“Out of 1,000 cases, only 600 are resolved within the year. What happens to the remaining 400? They are carried forward to the following year. A low resolution ratio leads to a backlog of cases,” Bawono claimed.
Bawono added that many of these issues, both complexity and uncertainty, could be addressed if tax policy in Indonesia were designed with greater taxpayer involvement. However, the right of taxpayers to participate in the policymaking process remains limited.
“When taxpayers lack a channel to be involved in policymaking, the resulting policies may fail to recognise the real challenges encountered by taxpayers,” he concluded. (sap)
