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Sri Mulyani pledges to improve tax arrears accounting after 'irregularities' found

Jakarta Post - August 27, 2020

Adrian Wail Akhlas, Jakarta – The government is seeking to improve its tax arrears accounting system after the Supreme Audit Agency (BPK) discovered irregularities in the existing arrangement, Finance Minister Sri Mulyani Indrawati said on Wednesday.

Addressing House Commission XI overseeing financial affairs, Sri Mulyani cited a BPK report on weaknesses in the internal monitoring system of the Tax Office and the Customs and Excise Directorate General.

The government implemented a new accounting system in early July to improve tax collection and to respond to the BPK's concerns, she said.

"We are hoping the accounting system will be able to address some taxation issues that have been raised repeatedly by the BPK," the finance minister told lawmakers.

The government expects the accounting system to provide real-time information on tax arrears. Sri Mulyani noted that the rise in tax arrears recorded in 2019 was partly due to a delay in excise payments.

According to data from the Finance Ministry, the tax arrears due to the government reached Rp 94.69 trillion (US$6.46 billion) in 2019, an increase of 16.22 percent from 2018.

The latest accounting system is part of the government's efforts to reform the country's tax system as the COVID-19 pandemic puts additional pressure on the government's finances in 2020 and 2021.

As of July, the government had received Rp Rp 922.2 trillion in state revenue, down by 12.4 percent from the same period last year. This figure is about 54 percent of the year's target and mainly consists of tax and excise revenue, which amounted to Rp 711 trillion.

Meanwhile, state expenditures had risen 1.3 percent yoy to Rp 1.25 quadrillion as of July.

Last year, the government took in Rp 1.96 quadrillion in state revenue, about 90 percent of its target, including Rp 1.54 quadrillion in tax and excise revenue.

"The tax reform agenda should be strengthened and continued, particularly by expanding the tax base," Sri Mulyani said.

The finance minister added that the government would continue reforms by simplifying the bureaucracy and improving data quality, among other measures. "We realize that conducting tax reform is not an easy task," she said.

BPK auditor Agus Joko Pramono said recently that the government's rising tax arrears suggested a weak internal monitoring system. He urged the government to resolve the issue to optimize tax collection.

Speaking during the hearing, Dolfie OFP of the Indonesian Democratic Party of Struggle (PDI-P) urged the government to collect the mounting tax arrears, adding that they would reduce the government's need to issue sovereign debt papers (SBNs).

"[Collecting] tax arrears could increase revenue compared to issuing more SBNs," he said.

The government is planning to raise Rp 990 trillion through the issuance of bonds in the second half this year and to raise $5.5 billion from multilateral organizations.

Source: https://www.thejakartapost.com/news/2020/08/27/sri-mulyani-pledges-to-improve-tax-arrears-accounting-after-irregularities-found.html