Nur Yasmin & Dion Bisara, Jakarta – The tax office has dashed hopes for a second tax amnesty over concerns that this may erode its credibility.

Undeclared assets worth more than Rp 4,884 trillion ($342 billion) were uncovered in the initial tax amnesty program two years ago. This saw the government rake in Rp 115 trillion in back taxes and registering about a million new taxpayers.

The Indonesian Chamber of Commerce and Industry (Kadin) requested the Ministry of Finance last month to launch another amnesty, as many of its members did not participate in the first one.

"Our position, from a technocratic side, is to disagree, actually. It is less credible if it is [repeated] too soon," Tax Director General Robert Pakpahan told the Jakarta Globe on Monday.

"Another tax amnesty would never be fair, especially to those who already complied with their obligations," he said.

Robert said the tax office may agree to providing some leeway to a lesser extent than a full tax amnesty for tax dodgers who wish to come clean.

"But we won't set it in stone. There are other policies that do not amount to an amnesty, such as a sunset policy – voluntary disclosure with different incentives," he said.

Indonesia issued a sunset policy in 2008 by foregoing all interest and fines on back taxes. Individuals or companies wishing to voluntarily disclose undeclared assets are currently required to pay fines of between 12.5 percent and 30 percent of the value of such assets. But doing so gives them a clean slate.

Incentives for companies

However, the tax office is eager to provide incentives to encourage greater investment in the country. The government recently launched super deduction tax facilities for companies that implement vocational and research programs.

The policy allows companies to mark up their spending on vocational education for employees by three times in their tax reports. This will result in virtually higher costs and lower profits, thus lowering their tax liabilities. Companies may also mark research expenses up by four times.

"This is in line with our vision to have excellent human resources," Robert said.

Apart from the super deduction policy, the government has also simplified procedures for tax holidays and tax allowances, seeking to make Indonesia more attractive to investment.

"The results are already visible. About 36 companies have so far applied to invest by utilizing these tax facilities. Over the next few years, they will bring in around Rp 451 trillion in potential investment," Robert said.

Indonesia is still running a current-account deficit and needs to attract large amounts of foreign direct investment to balance its books, the tax director general said.

"Competition between countries is getting fiercer. If other countries give tax holidays and we don't, we lose out. If we don't do anything, we won't get any investment," he said.

Source: https://jakartaglobe.id/context/second-amnesty-unlikely-but-some-leeway-still-possible-tax-office