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Indonesia goes hi-tech in hunt for tax assets after amnesty

Indonesia goes hi-tech in hunt for tax assets after amnesty

JAKARTA: Indonesia’s tax office plans to spend hundreds of millions of dollars to update its outdated technology to boost low tax compliance and raise revenue collection in Southeast’s largest economy, the country’s tax chief told Reuters.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.Indonesia will buy a new “core tax system” via a tender this year with a winner due to be announced next year, he said. The tax chief estimated the budget at around 3 trillion rupiah ($218.1 million), but said it could cost more as other countries have been known to spend $400-$600 million for a similar system.

With the new technology, Pakpahan said the tax office would be better able to profile taxpayers and uncover ones who may not have paid. The system could also analyze margins to help the tax office find possible doctored financial statements or cases of transfer pricing – where a company exports at a lower price or at a loss to an affiliate to report lower profits or avoid tax.