President Joko "Jokowi" Widodo has notified the House of Representatives about his intent to introduce another tax amnesty program, the second in five years, as part of the government attempt to boost tax revenues amid the Covid-19 pandemic. The Coordinating Minister for Economic Affairs Airlangga Hartarto said a stipulation about tax amnesty would be included in a bill for the 2009 Law about General Provisions and Tax Procedures revision. Tax amnesty is a free pass for taxpayers to disclose incomplete or unreported income in their previous tax periods without facing prosecution by the tax court or paying any penalty.
During this period, the taxpayers only need to pay a special tax for a government pardon on their tax liability. Similar tax amnesty programs and regulations were offered back in 1964 and 1984. According to a scholarly article published by the Finance Ministry, they did not have much success due to low participation. Meanwhile, Indonesia has collected Rp 228 trillion in taxes in the first three-month period this year, down 5.6 percent from the same period last year. That amounted to less than 19 percent of the government's tax revenue target of Rp 1,229.6 trillion for 2021. Last year, the government collected Rp 1,070 trillion in tax revenue, reaching just 89.3 percent of its Rp 1,198.8 trillion targets as the social restrictions to curb the spread of the Covid-19 pandemic dragged the economy. The government held the first tax amnesty program in 2016 and 2017, allowing tax evaders to come clean and declare their back taxes and hidden assets to the tax authorities, with only having to pay a much smaller amount than what they had to pay if the authorities caught them red-handed.
The scheme of Tax Amnesty
The government will hold a "tax amnesty volume II" or Voluntary Disclosure Program (PPS) for taxpayers (WP) from January 1, 2022, to June 30, 2022. As is known, this program aims to increase taxpayer compliance and is held based on the principles of simplicity, certainty, law and benefits. In this tax amnesty volume II, the government provides an opportunity for taxpayers to report or disclose tax obligations that have not been fulfilled voluntarily through the payment of income tax (PPh) based on assets that have not been or have not been fully reported by participants of the tax amnesty program. In addition, taxpayers can also disclose their tax obligations that have not been fulfilled through the payment of income tax based on the disclosure of assets that have not been reported in the Annual Individual Income Tax Return for the 2020 Fiscal Year.
The implementation of PPS is regulated in Law (UU) Number 7 of 2021 concerning Harmonization of Tax Regulations. The regulation divides PPS into two tax amnesty policy schemes. First, the PPS program for 2016-2017 tax amnesty alumni for those who have not had time to disclose their tax obligations at that time. This scheme applies to both individual taxpayers and corporate taxpayers. In this Tax Amnesty Volume II program, the government has two policies, including:
I . Policy
The subjects of policy are individual taxpayers and tax amnesty participating entities. On an asset basis, as of December 31, 2015, which had not been disclosed when participating in the tax amnesty. Participants can get a low final PPh rate if most of their assets are invested in SBN/downstream/renewable energy. With details of the final PPh rates, namely:
11% for overseas declaration
8% for repatriated foreign assets and domestic assets
6% for repatriated foreign assets and domestic assets.
The subject of policy II is an individual taxpayer. With an asset base of 2016-2020, acquisitions have not been reported in the 2020 Annual Tax Return. Participants can get a low final PPh rate if most of their assets are invested in SBN/downstream/renewable energy. With details of the final PPh rates, namely:
18% for overseas declaration
14% for repatriated foreign assets and domestic assets
12% for repatriated foreign assets and domestic assets.
Specifically for participants in the tax amnesty program in policy II, the government imposes four conditions that must be met to participate in the tax voluntary disclosure program from January 1 to June 30, 2022. First, you must have a Taxpayer Identification Number (NPWP). Then, pay the final Income Tax (PPh). Furthermore, participants have submitted the Annual Income Tax Return for the 2020 Fiscal Year. Fourth, taxpayers must revoke 9 applications as a condition for participating in the tax amnesty program volume II.
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Benefits of Tax Amnesty
Participants of the tax amnesty volume II group I get a final income tax rate 6-11% on net assets, with details of 11% for assets abroad that are not repatriated to the country; 8% for assets abroad that are repatriated to the country; and 6% for overseas assets repatriated domestically and invested in state obligations (SBN), downstream natural resources (SDA), and new and renewable energy (EBT).
As for the tax amnesty volume II group II, the final income tax rate is set at 18% for assets abroad that are not repatriated to the country, 14% for assets abroad that are repatriated to the country, and 12% for assets abroad that are repatriated to the country. Domestically and invested in SBN, downstream natural resources, and NRE.
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