BERITA TERKINI
AKARTA, DDTCNews - The government and the House of Representatives (Dewan Perwakilan Rakyat/DPR in Indonesian), as lawmakers, need to establish clear and appropriate justifications to administer a tax amnesty.
Director of Fiscal Research and Advisory of DDTC, B. Bawono Kristiaji, stated that clear justification is essential as a foundation for drafting the Tax Amnesty Draft Law and determining its key features.
“In my view, a tax amnesty is an extraordinary policy instrument in taxation. Once it is introduced, it must be supported by strong justification, relevance and underlying considerations. This is necessary to ensure alignment with Indonesia’s needs and to assess its effectiveness against the objectives outlined in the academic paper,” he said at an event organised by the Tax Accountant Compartment of the Institute of Indonesia Chartered Accountants (Kompartemen Akuntan Pajak Ikatan Akuntan Indonesia/KAPj IAI in Indonesian) on Wednesday (16/4/2025).
According to Bawono, there are at least 6 justifications for implementing a tax amnesty. First, to increase revenues. However, it should be noted that tax remittances generated from a tax amnesty programme is often lower than in previous iterations.
For instance, in 2016, the government collected IDR135 trillion from the programme, whereas in 2022, the voluntary disclosure program (program pengungkapan sukarela/PPS in Indonesian) only generated IDR61 trillion.
Despite declining potential, revenue requirements may still justify tax amnesty as a short-term measure.
“Whatever helps plug the revenue gap remains relevant,” Bawono remarked.
Second, to broaden the tax basis. Bawono argued that this is not a particularly relevant justification, as expansion of the tax basis, both in terms of tax subjects and taxable objects, has already progressed in recent years without tax amnesty or similar initiatives.
Between 2023 and 2024, the number of registered taxpayers increased by 17%, from 74 million to 86.7 million, driven by measures such as the use of the national identification number (nomor induk kependudukan/NIK in Indonesian) as the taxpayer identification number (TIN or nomor pokok wajib pajak/NPWP in Indonesian), the determination of in-kind as income tax objects, request for data collection from government agencies, institutions, associations and other parties (instansi pemerintah, lembaga, asosiasi, dan pihak lain/ILAP in Indonesian) and the automatic exchange of information (AEOI).
“Is tax amnesty necessary to expand the tax basis? Perhaps. However, many other instruments have already proven effective in increasing the tax basis and addressing the shadow economy,” he noted.
Third, to improve tax compliance. In the literature, repeated tax amnesties may actually undermine voluntary compliance. In other words, compliance does not constitute a solid justification for another tax amnesty.
Studies by James Alm, Sally Wallace and Jorge Martinez-Vazquez in Do Tax Amnesties Work? The Revenue Effects of Tax Amnesties During the Transition in the Russian Federation suggest that tax amnesties do not produce lasting compliance benefits unless accompanied by stronger enforcement and compliance measures.
According to Bawono, tax amnesty may instead signal weak enforcement by the tax authority to the taxpayers.
“When tax amnesty is repeatedly implemented, the government may be perceived as weak rather than forgiving,” he claimed.
Fourth, to encourage repatriation of offshore assets. Bawono explained that tax amnesty is not the primary factor influencing investment decisions. Repatriation is more strongly driven by a tax factor other than tax amnesty and non-tax factors.
The tax factor in question is the tax system. Capital owners will be encouraged to repatriate if the jurisdiction shifts from a worldwide system to a territorial system. Currently, Indonesia adheres to the worldwide system, although there are exclusions for foreign dividends repatriated domestically.
On the other hand, the non-tax factors significantly affecting decisions on investments are the rate of return.
"The decision to invest in a jurisdiction is based on return, risk, yield and other factors. If there is foreign exchange risk, they will naturally be reluctant to invest in a jurisdiction," said Bawono.
Fifth, to promote fairness. Bawono elaborated that tax amnesty can be designed to reduce inequality, strengthen solidarity and distribute the tax burden more evenly.
Indonesia’s tax revenue is currently concentrated among a limited group of taxpayers in specific sectors. In this context, tax amnesty could function as a form of solidarity tax, encouraging higher contributions from wealthier individuals.
“When inequality becomes an issue, a solidarity tax as a top-up tax mechanism for certain groups could be considered,” he added.
Sixth, as a bridge to a new tax era. Bawono explained that tax amnesty may serve as a transitional instrument toward major reforms, such as the implementation of the new coretax administration system, the establishment of a new tax institution or the introduction of new levies.
“Tax amnesty can be linked to what the government plans to implement next; whether it marks a transition before launching the coretax, before the establishment of the state revenue agency (badan penerimaan nasional/BPN in Indonesian) or before restructuring the Tax Court under the Supreme Court. This needs to be further examined,” he concluded. (rig)
