Tax amnesty is actually a government effort to give opportunities for taxpayers to become clean, with the hope that they can continue paying their taxes with reduced or waived interests and/or penalties.
This amnesty is given for a certain period of time and is given to both individuals and companies. Ideally, this kind of amnesty will give benefits for both parties—the taxpayers and the government. On one side, the taxpayers will not get penalty by the big amount of unpaid tax of their responsibilities. On the other hand, the government will also receive revenues from the unpaid taxes. Moreover, the taxpayers will likely to keep paying taxes regularly in the future if their unpaid taxes have been paid or settled (find out more about tax reporting in Indonesia). However, all policies must have supporters as well as critiques. In this article, we will discuss both the advantages and challenges of tax amnesty policy for business people.
1. It encourages the tax payers to do businesses fairly and legally in Indonesia (further information about income taxation system in Indonesia). To be able to run business in Indonesia, you have to make sure that you follow its regulation firmly. Tax evasion has severe consequences, including high interests or penalties and legal punishment.
2. It will create a good record for you and your company. There is an Automatic Exchange System of Information in Indonesia, which means that your data can be viewed by across governmental departments. If you have bad debts or violate the tax regulations, it will impact your business in wider perspectives. You will have difficulties in extending your business license, renewing your company’s information or data, prolonging visas, and other bureaucratic issues. You will always be asked for your tax number in doing any government-related administrative or bureaucratic procedures (know more about corporate and personal income tax in Indonesia).
3. You and your company can buy more properties to expand your business. Buying properties without healthy tax record is almost impossible, especially for foreign companies. Therefore, voluntarily report your tax and use this tax amnesty opportunity is great for your long term strategy of your business.
4. You don’t need to pay for the interest or get lower interests from the tax that you failed to pay. This will give you less burden as you want to play fairer in Indonesian market.
5. You or your company does not need to encounter any legal issues or disputes. If your tax evasion case has been brought to court, all the investigation processes can be stopped.
However, this tax amnesty policy is not without challenges. Indonesian government had long been discussing about this policy before implementing until March 2017. Some of the challenges include:
1. The deliberate actions of the business people to avoid taxes with the hope of receiving another tax amnesty. This can be one of the biggest fears from implementing this policy because some unfair players may use this opportunity to take more profits by avoiding taxes. This unwanted action is based on the idea that there will be another tax amnesty in the future so that those unfair players tend to ignore the chance of having this amnesty. However, the limited period of the amnesty shows the government’s concern on this issue that there will be strict punishments await for those who disobey the taxation rules.
2. The companies that have assets or money in foreign countries will finally bring their assets or money back to Indonesia. This will create efforts from other countries to tackle the tax amnesty policy and keep the investment in their respective countries. When this happens, business people have to choose between participating in the tax amnesty program or accepting the offers given by the countries where they invest their money.
3. Business people have fears that the tax amnesty policy will create problems in the future if the confidentiality of this policy has no guarantee from government. Security is one of the greatest challenges for the business people. If the government cannot guarantee the security of the program, many business people hesitate to voluntarily participate in tax amnesty.