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Indonesia's tax burden

Source
Straits Times - November 13, 2000

Robert Go, Jakarta – As the government steps up efforts to enforce tax regulations and collect taxes, some citizens grumble privately that more of their hard-earned rupiah might go to the state's coffers in the future.

"Of course I pay tax. But yes, I under-report my income," said Mr Abang, who spoke to The Straits Times on condition his full name was not used. According to the Jakarta businessman, nobody he knows pays his or her full tax obligations and many do not pay at all. Government officials, he said, not only are easy to bribe, but in most instances would initiate the process by hinting that a little "fragrant grease" would knock zeroes off the bottom-lines.

Ms Ayu, who also spoke confidentially, suggested that Indonesians' hesitation at paying the full tax bill might stem from the widespread perception that the government sees only a portion of the money as the difference ends up in officials' pockets.

"It's silly to pay the full amount, especially if the government probably gets only a portion of it and public services remain minimal," she said. The two individuals said their real earnings were over 200 million rupiah (S$40,000), which put them in the top tax bracket. They are thus taxed at a rate of 35 per cent of their income. But the government has only collected 10 per cent to 15 per cent from them, and others in similar positions, over the last 10 years.

Self-employed Indonesians, like Mrs Ina who lives in the East Java capital of Surabaya, file their tax forms independently and with little supervision. Mrs Ina doesn't worry much about audits "as long as the amount of taxes paid matches the visible wealth – cars, houses, and other property. It is unrealistic to expect people to want to pay taxes. That's why it's called the tax burden," she said.

Of course, there are those who regard paying taxes as a serious responsibility. A foreign executive who is based in Jakarta reported that both he and his firm steer clear of hanky panky when it comes time to cough up some cash to the government.

But such a form of civic responsibility is rare in Indonesia. Part of the problem is that the government has so far been lax in enforcing tax regulations and cleaning up corruption within the tax collection service.

Tax identification numbers are not automatically assigned to Indonesians, and as a result, only about half of 1 per cent of the 200-million population is registered as taxpayers.

People against tax

Complaints:

  • Corrupt officials pocket a portion of tax paid.
  • Trash collection, street lighting and road maintenance are not consistent and do not justify tax obligations.
  • Bureaucrats and red tape make filing process a waste of time.
Ways of cheating:

  • Under-reporting income to lessen tax burden.
  • During tax collection time, hide the Mercedes-Benz and bring out the Toyota.
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