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Indonesia facing difficulty to meet tax revenue target
Publication Date : 24-09-2012
Indonesia will face difficulties in meeting the tax revenue target agreed with the House of Representatives last week because uncertainties in the global economy are expected to continue to affect the country's exports.
"I believe it is going to be very difficult to achieve 13.5 per cent of tax ratio because the global crisis impact on Indonesia has been increasing. This situation is clearly shown in our plunging commodity prices and export volume," Finance Minister Agus Martowardojo said.
The government, represented by the Finance Ministry, and the House's Commission XI on finance agreed during a meeting last Wednesday to set the 2013 tax ratio at between 12.75 per cent and 13.5 per cent of the country's gross domestic product (GDP).
Martowardojo argued that the 12.75 per cent tax ratio proposed by the government, which rose from 12.3 in 2012, 11.8 per cent in 2011 and 11.3 per cent in 2010, would be high enough for Indonesia because the rise in the projected significant increase in the country’s GDP next year.
In the 2013 state budget, the government's tax revenues are set at 1,178 trillion rupiah (US$123.69 billion) or 12.75 per cent from the projected GDP of 9,300 trillion rupiah in the year, up from about 8,274 trillion rupiah estimated this year.
House members have insisted on the need to meet the tax ratio target of 13.5 per cent in order to cope with the rise in the subsidy by 15 trillion rupiah.
“Both individual and corporate taxpayers have begun to feel the impact of the crisis. To achieve 13.5 per cent of tax ratio, we need to add at least 120 trillion rupiah of tax income. If we tax taxpayers more to achieve our target, then they will face more difficulties in this time of global uncertainty,” he added.
The ambition to reach the tax ratio target is potentially even more challenging after Martowardojo confirmed that the government was currently formulating a tax-cutting scheme that would increase non-taxable income (PTKP) to between 24 million rupiah and 30 million rupiah per year from the current rate of 15.8 million rupiah per year.
"If the PTKP rate increases, then tax revenue will decrease, but we believe we need to do this to maintain purchasing power amid the global crisis," Martowardojo said.
The government would then try its best to increase the number of registered tax payers to achieve the 2013 tax ratio target, according to Martowardojo. He said there was still huge potential for tax income to grow as there were millions of unregistered taxpayers in the country, whether individual or business taxpayers.
As of January 2012, the Taxation Directorate recorded only around 8.5 million individual taxpayers from more than 40 million formal Indonesian workers listed in the country.
Martowardojo added that the government would also intensify tax revenue from value-added tax (VAT) in various sectors, such as mining, to achieve the planned tax ratio target.
Taxation Directorate General Fuad Rahmany said in his latest presentation at the House that the taxation office would increase the country's taxpayer base by developing a simpler system for registering eligible taxpayers.
As for VAT intensification, Rahmany said the taxation office would launch a new registration programme to list business taxpayers and improve VAT monitoring mechanisms using a new electronic invoicing system.
Rahmany added that the taxation office would outsource to an independent surveyor to collect primary data in the mining and plantation sectors to ensure accurate listings of productivity.
US$1 = 9,545 Indonesian rupiah