Recent reform steps
Indonesia has taken the following major steps towards enhancing domestic revenue mobilisation:
- Rolling out the Tax Amnesty Programme in 2016 to 2017 to expand tax base, enhancing the Director General of Taxation’s (DGT) data, improving tax compliance and developing a fresh relationship between taxpayers and the DGT;
- Implementing a tax reform with five improvement pillars: introducing a new core tax system in IT and improving the data management system, improving the business process, human resources, restructuring organisation, and improving regulations, tax services development.
Indonesia has implement several tax reforms since 2000. After the completion of the Tax Amnesty Programme in 2017, Indonesia launched its third tax reform, focusing on the following five main topics: organisation, human resources, information, technology and database, business process, and regulation.
In terms of taxpayers’ compliance management, Indonesia
- Improved value added tax (VAT) compliance, which covers improvement in terms of registration, filling, payment and correct reporting;
- Increased withholding tax compliance through filing automation and data matching between withholders and employees/taxpayers;
- Enhanced service and administration of wealthy individuals (professionals, high earners and high wealth individual).
Moreover, institutional reforms
- Improved the IT system through Core Tax System (CoTS);
- Developed both internal and external data management through the establishment of a Data Management Unit (DMU);
- Simplified the business processes for quality of service improvement.
Outlook: DRM priorities in 2019
Currently, Indonesia is enacting the outdated law (General Procedures, Income Tax and VAT Law) to catch up with the fast-growing business and digital environment. In addition, Indonesia emphasises institutional reform and leverages its resources to improve taxpayers’ compliance.
Build a system to map taxpayers’ compliance based on their risks (compliance risk management, CRM)
Improve service with online forms, easier refund, automation and data matching
Leverage third-party data as well as data gathered through Exchange of Information (EoI)
Improve IT and data management
Simplify business processes
Organise reform and human resources capacity enhancement
- DGT will be able to focus its resources to collect revenue in an effective and efficient way
- Taxpayers will be more comfortable with the tax authority, which will increase voluntary compliance in the near future
- Mobilising revenue from prominent individuals as well as offshore accounts will become easier
- State-of-the-art IT system and better data management to improve DGT’s capability on mobilising revenue
- Better quality of service, agile organisation and world-class tax officers
Ensuring policy coherence for development
Indonesia is working towards policy coherence by implementing EoI, a joint programme with other institutions (customs, local governments, the Central Bank etc.) and new IT system/COTs (including CRM). Further, Indonesia is working on human resources improvement management programmes, which tackle remuneration, capacity building, improvement rotation and promotion systems. In terms of international organisations, Indonesia is engaging with the IMF, the World Bank and the OECD (MTRS, Inclusive Framework, capacity building, development programme loans, and other assistances).