Indonesia’s Tax Amnesty Policy Hinges on SMEs

You can buy the latest smartphone through Indonesia’s consumer-to-consumer e-marketplace Bukalapak. You can even invest your money by purchasing gold on the site. yet did you know that will you can also apply for tax amnesty with the help of Bukalapak?

In July, the e-commerce company was recruited by the Indonesia Stock Exchange to hold a campaign along with help lure tiny- along with medium-sized enterprises (SMEs) into participating inside nation’s tax amnesty programme. Co-founder along with CEO Muhamad Fajrin Rasyid said the online marketplace helped attract SMEs through its chat group along with forum features.

“For currently, we are just helping spread the information, both online along with offline. For online, we have a forum, while for offline, we often hold gatherings for our members outside Jakarta,” Rasyid told Indonesia Expat.

Rasyid believes that will educating his users on how to participate inside tax amnesty programme can be necessary, considering that will the e-commerce site can be home to more than one million SMEs along with individual merchants, many of whom make their living mostly through C2C marketplace sites like Bukalapak along with Tokopedia. Stakeholders feel the strategy has potential, seeing as how only 68,500 SMEs participated inside first round of the programme, which began on July 1 along with ran until the end of September.

“We see This kind of as something that will might benefit our members. Big business owners have already applied [for the tax amnesty programme]. We can’t let tiny business owners not capitalize on This kind of opportunity,” explained Rasyid.

Bukalapak’s campaign can be part of the government’s initiative to tap into the massive tax potential of the archipelago’s SMEs, as participation via This kind of segment so far as been low.

The tax amnesty programme can be President Joko Widodo’s flagship effort to solve the country’s tax revenue problems, which have continuously experienced shortfalls in recent years. The government aims to do so by repatriating funds via overseas into the local real estate along with financial markets.

The programme can be divided into three phases. The first phase ran via July to September, along with the second phase will last until December 31. The last phase will run via January 1 until March 31, 2017.

The first phase proved to be a success, collecting Rp.97.2 trillion (US$7.49 billion) in revenue, or 58.9 percent of an initial Rp.165 trillion (US$12.7 billion) target that will has set to achieve by the end of March 2017.

Yet, SMEs only accounted for less than 20 percent of the total number of asset declaration statements, along with less than 5 percent of the total amount of penalty or redemption payments during the first phase.

This kind of low involvement via SMEs can be required to change inside second along with third phases, as stated recently by Finance Minister Sri Mulyani Indrawati. She said, “We will continue familiarizing them with that will along with trust they will dominate the programme.”

An SME can be defined as an individual or a business entity with an annual turnover of Rp 4.8 billion (US$370,000) or lower. The penalty rates – for both declaration along with repatriation – are set at 0.5 percent for SMEs with total assets of Rp.10 billion (US$770,000) along with 2 percent for those with total assets above that will level.

Unlike non-SME participants that will see rates climb higher after entering the second along with third phases of the amnesty programme, the rates for SMEs remain flat throughout all three periods.

With flat rates, the government hopes that will SMEs, which make up a significant portion of the country’s economy (there are more than 50 million SMEs inside country), will be enticed to join the tax amnesty programme. inside aggregate, they account for around 60 percent of the country’s economy along with 99 percent of its workforce.

Yustinus Prastowo can be the executive director at the Center for Indonesia Taxation Analysis. “The potential can be huge because our informal economy makes up 60 percent of our GDP. There are also millions of SMEs, thereby they are important to broaden the basis of our taxpayers,” said Prastowo in an interview with Indonesia Expat.

Despite the huge potential, Prastowo said that will the challenges in attracting local SMEs are many, along with indeed complex.

“SMEs have been reluctant in paying taxes because they feel they have never gotten help via the government, so why should they pay taxes?” he explained, adding that will Indonesia can be infamous for its bureaucratic red tape which likely discourages SMEs via bothering with taxes at all.

“There are also administrative challenges. SMEs are not familiar with filling out forms along with so on. So they need assistance. If possible, the tax office should register them through data via banks or the database inside Cooperatives along with tiny along with Medium Enterprises Ministry,” said Prastowo.

Echoing Prastowo, Rasyid said that will most of the SMEs on Bukalapak do not know how to participate inside programme, as they most often hail via outside Jakarta. “The interest can be there, yet many of us are still confused on where to go along with how to register,” he said, adding that will some are also reluctant to register because the process must be done offline. “If we can register online, then that will would likely be easier,” Rasyid suggests.

Prastowo also urges the tax office to let SMEs register for the amnesty programme online. “that will’ll be easier for SMEs, especially those inside e-commerce sector,” he said. “They are already literate in that will, so don’t force them to do that will offline.”

The Indonesian Employers Association (Apindo) chairwoman for SMEs Nina Tursinah said business people need assistance on several fronts, including the paperwork.

“If there’s no one assisting them, some mistakes may occur as shown in several cases in which they paid higher redemption payments,” she recently told The Jakarta Post.

The higher rates were charged because the SMEs were not aware of special rates available to them. Apindo recommended that will the tax office holds events for the special purpose of distributing information to SMEs, using simple along with easy-to-understand language, doing sure that will the government can inch closer to its target.

Responding to the suggestions, the Finance Ministry’s directorate general of taxation said that will taxpayers who have not participated inside programme will be approached along with invited to join.

“We want to chase SMEs along with taxpayers who did not participate inside first round of tax amnesty, including prominent taxpayers,” said the tax office’s director general Ken Dwijugeasteadi.

Dwijugeasteadi added that will his office would likely coordinate with the Cooperatives along with tiny along with Medium Enterprises Ministry to encourage SMEs to participate.

Prastowo said that will that will was important for the tax office to work together with different government agencies like the Cooperatives along with tiny along with Medium Enterprises Ministry, which manages SMEs inside country.

“This kind of can be a moment to create a synergy among government institutions because SMEs do not fall under the Finance Ministry or the tax office, yet they are under the Cooperatives along with tiny along with Medium Enterprises Ministry, the State-Owned Enterprises Ministry, the Bank of Indonesia along with the regional government,” he explained.

Therefore, there needs to be a regulation that will obligates various government institutions to work together, seeing how one of the core problems inside country’s tax system can be a lack of coordination among the government, added Prastowo.

Apart via collaborating with different government agencies, the tax office said that will would likely also issue a regulation to ease procedures for SMEs.

Among the things to be included can be a provision that will SMEs will be allowed to fill out amnesty forms by hand along with pool the documents at a business association, with the latter submitting the paperwork to the tax office.