JAKARTA: Indonesia’s tax office plans to spend hundreds of millions of dollars to update its outdated technology to boost low tax compliance and raise revenue collection in Southeast’s largest economy, the country’s tax chief told Reuters.
Indonesia completed one of the world’s most successful tax amnesties in 2017, but its very success has created headaches. The tax office has to use old technology or even manual labor to deal with a wealth of new data, Robert Pakpahan, director general of the finance ministry’s tax department, said.
A standard method of assessing companies’ profit margins, for example, has to be done manually by tax officials, said Pakpahan. “It should be done by machines, through automation so that it’s accurate.”
The majority of Indonesia’s more than 250 million people do not pay tax and many are not even familiar with the concept of paying. Only 38 million are registered taxpayers, including corporations, and less than a third submit tax returns.
A nine-month tax amnesty that ended in March 2017 exempted tax dodgers from prosecution and imposed on them only small fines if they declared their undisclosed wealth, which helped the government unearth assets worth around $330 billion. Moreover, a law passed in 2017 requires financial institutions to share data with the tax offices from this month under a global transparency drive, while data on offshore assets should be shared from September.
With only 43,000 staff, Pakpahan, who was appointed to the job last November, said it was difficult to manage data while going after, sometimes, reluctant taxpayers.