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Indonesia’s Tax Amnesty program: pros and cons

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Susy Suryani of Suryani Suyanto & Associates explains how the second round of Indonesia’s Tax Amnesty program works, and analyses how the government can learn from the successes and failures of the initial round in 2016.

The Voluntary Disclosure Program (PPS), or what is commonly called Tax Amnesty Volume II, is an effort by the Indonesian government to encourage taxpayer compliance. It provides an opportunity for taxpayers to voluntarily disclose their tax assets and any obligations that have not been fulfilled.

Through the payment of income tax based on the disclosure of assets, provided that the Director General of Taxes has not found data and/or information regarding the said assets, the taxpayers are provided with a second chance to amend their past tax undertakings under very favourable terms.

PPS is a follow-up to the provisions in Chapter 5, Article 5 of the HPP Law No. 7 of 2021, and has been further regulated in the Minister of Finance Regulation No. 196/PMK.03/2021 concerning procedures for the implementation of the taxpayer voluntary disclosure program. The period of implementation of this PPS is from January 1 2022 to June 30 2022.

Background to the implementation of PPS

The implementation itself is also in line with the concept described by the OECD in its Update on Voluntary Disclosure Programmes, A Pathway to Tax Compliance, August 2015, which is explained as follows:

“In general terms, voluntary disclosure programmes are opportunities offered by tax administrations to allow previously non-compliant taxpayers to correct their tax affairs under specified terms. It facilitates compliance in a timely and cost effective manner, saving costly and contentious audits, litigation and criminal proceedings.

To succeed, they need to tread a fine line between encouraging noncompliant taxpayers to permanently improve their compliance and retaining the support and compliance of the vast majority of taxpayers who are already compliant. They also need to be consistent with relevant rules in the non-tax area such as anti-money laundering rules.”

Meanwhile, the background of the PPS program can be seen from several points of view, for example:

  • Disclosure of assets that are not, or have not been, fully reported in the tax amnesty program;

  • Disclosure of assets that have not been reported in annual income tax returns; and

  • Data from the automatic exchange of information (AEOI).

Furthermore, according to Suharno, the director of TaxPrime Academy, Fiscal Research, Management and Education (FRAME), and also a founder and CEO of Smart English, in his book Panduan Lengkap Program Pengungkapan Sukarela Wajib Pajak (Complete Guide to the Taxpayer Voluntary Disclosure Program), one of the factors that is important in the background of this PPS program is the automatic supply of data from ILAP (agencies, institutions, associations and other parties).

Data regulation

This data is regulated in Article 35A of the General Provisions and Tax Procedures Law (KUP), and in the Government Regulations No. 1 Law of 2017 regarding the disclosure of financial information for tax purposes.

Article 35A, paragraph 1 of the KUP Law stipulates that “Every government agency, institution, association, and other party must provide data and information related to taxation to the Directorate General of Taxes...”

Article 35A, paragraph 2 of the KUP Law stipulates that “In the event that the data and information as referred to in paragraph (1) are not sufficient, the Director General of Taxes has the authority to collect data and information for the benefit of state revenues...”

Meanwhile, Government Regulation No. 1 of 2017, shows Indonesia’s commitment to implementing an automatic exchange of financial information based on the Common Reporting Standard (CRS) compiled by the Organization for Economic Cooperation and Development (OECD) and the G20.

Meanwhile, Article 1 of the 2017 Government Regulations No. 1 states: “Access to financial information for tax purposes includes access to receive and obtain financial information in the context of implementing the provisions of laws and regulations in the field of taxation and the implementation of international agreements in the field of taxation”.

PPS Schematics and Types

Based on PMK 196/PMK/03/2021 concerning procedures for the implementation of the taxpayer voluntary disclosure program, the disclosure of net assets by taxpayers consists of the following two schemes:

  1. Policy 1 is a program for disclosing net assets obtained by individual taxpayers from January 1 1985 to December 31 2015, provided that the Director General of Taxes has not found data and/or information regarding the said assets.

  2. Policy 2 is a program for disclosing net assets obtained by private individuals from January 1 2016 to December 31 2020, provided that the Director General of Taxes has not found data and/or information regarding the said assets.

Legal certainty for taxpayers who take part in the PPS program

This voluntary disclosure program certainly raises questions for taxpayers, such as whether there is legal certainty after the taxpayer declares all assets and reports it in this PPS program.

Through the provisions stipulated in the HPP Law No. 7 of 2021, the government has guaranteed legal certainty for taxpayers participating in this PPS program, including:

  • Policy 1

    • Article 6, paragraph 5 of HPP Law No. 7 of 2021: taxpayers who have participated in the PPS program, and have obtained a certificate of delivery of assets, are not subject to administrative sanctions (200% of the principal tax that is not/underpaid), as referred to in Article 18 paragraph (3) of Law No. 11 of 2016 concerning tax amnesty.

    • Article 6, paragraph 5 of the HPP Law No. 7 of 2021: where data and information sourced from notices of the disclosure of assets and attachments that are administered by the Ministry of Finance or other parties related to the implementation of PPS cannot be used as the basis for investigations and/or criminal prosecutions of taxpayers.

  • Policy 2

    • Article 11, paragraph 1, letter A of the HPP Law No. 7 of 2021: no examination is carried out on taxpayers, no tax provisions on tax obligations are issued for the 2016, 2017, 2018, and 2020 tax years, unless data and/or other information regarding assets have not been disclosed in the disclosure letter.

    • Article 11, paragraph 1, letter C of the HPP Law No. 7 of 2021: where data and information sourced from notices of disclosure of assets and attachments that are administered by the Ministry of Finance or other parties related to the implementation of PPS cannot be used as the basis for investigations, and/or criminal prosecutions of taxpayers.

Benefits obtained by taxpayers in terms of low tax rates

One of the interesting factors of this PPS program is that the tax rate offered by the government is quite low for both Policy 1 and Policy 2. Considering that the PPS Program is generally followed by taxpayers who otherwise face the highest tax rate of 30%, taxpayers can enjoy a significant potential tax saving by participating in this PPS program.

For Policy 1, which is in the range of 6-11% compared to the normal 30% tariff, there is a tax saving from the taxpayer side of 19-24%. Meanwhile, for corporate taxpayers, with the PPS program tax rate ranging from 6-11%, there is also tax saving from the normal rate between 14-19%.

Meanwhile, Policy 2 is in the range of 12-18% compared to the normal 30% tariff, so there is a tax saving from the side of the taxpayer in the range of 12-18%.

What about the assets of the Taxpayer residing outside Indonesia?

Taxpayers who declare the transfer of net assets located abroad into Indonesian territory must transfer the said assets at the latest September 30 2022.

It should be noted that taxpayers who disclose net assets located in Indonesian territory and/or transfer net assets into Indonesian territory cannot transfer such net assets outside Indonesian territory for a minimum period of five years from the date of issuance of the statement letter. (The certificate of disclosure of net assets is evidence of taxpayer participation in the voluntary disclosure program based on the law). The transfer is carried out through a bank in accordance with the provisions of the laws and regulations in the banking sector.

In order for taxpayers to enjoy a lower income tax rate of only 6% of net assets brought into Indonesian territory, there are other requirements that must be met by taxpayers. The proceeds must be invested in:

  1. Business activities in the natural resource processing sector or the renewable energy sector within the territory of Indonesia, which are carried out in the form of:

  2. New business establishment; and/or

  3. Equity participation in companies that make initial public offerings and/or pre-order securities (right issues).

  4. Government securities by meeting the following requirements:

  5. Investment in government securities is carried out through purchase transactions of government securities in the primary market; and

  6. Implemented by means of private placement through dealers.

Taxpayers who declare that they invest their net assets in the above sectors are required to invest the said net assets at maximum before September 30 2023. The investment must be made for a minimum of five years from the time it was invested.

Is this PPS the right policy to increase voluntary compliance?

The number of taxpayers who took part in the tax amnesty is still below expectations. The Minister of Finance said that the tax amnesty program run by the government has not been widely utilised by taxpayers.


“The government of Indonesia still hopes that the positive side of this program will have a greater impact than the negative side.”


The tax amnesty targets set by the government are declared assets of IDR 4000 trillion ($0.27 trillion), repatriation of IDR 1000 trillion, and a ransom of IDR 165 trillion. In terms of target achievement, the government achieved IDR 4,734 trillion, exceeding the target of IDR 4000 trillion. Meanwhile, the other two sides did not achieve the target. The government achieved the repatriation of IDR 147 trillion, missing the target of IDR 1000 trillion, and achieved a ransom of IDR 135 trillion, under the target of IDR 165 trillion.

In other words, the tax amnesty from the declaration side was successful because it exceeded the target of IDR 4,000 trillion, but repatriation was considered a failure because it only achieved less than 15% of the target of IDR 1,000 trillion. The amount of ransom money that came in was 135 trillion, which is the largest income among countries in the world that have implemented tax amnesty.

Wider effects of the 2016 tax amnesty

However, the results of the 2016 Tax Amnesty I on the tax administration system and macro-economy show that the tax amnesty has had no impact on accelerating economic growth and restructuring, increasing domestic liquidity, improving the rupiah exchange rate, decreasing interest rates, or increasing investment.

The repatriation had no significant effect either. Variables such as liquidity and exchange rates are more affected by global economic conditions and investment competitiveness. The taxpayer database after the tax amnesty is not optimal, so it has less impact on the database for extracting potential taxpayers.

In short, it can be said that while the tax amnesty in Indonesia was quite successful in terms of disclosure of hidden assets through declarations, but was less successful in terms of repatriating the funds that are parked oversea.

After looking at the successful experiences and the shortcomings of Tax Amnesty I, five years later the government again carried out the PPS program, called Tax Amnesty II. Many people said that the second program came too soon after the first tax amnesty, meaning it could be counterproductive to taxpayer compliance.

Some notes on the negative side of the implementation of tax amnesty are as follows:

  • It creates a sense of injustice, especially for taxpayers who have been obedient in paying taxes. They feel that they are being treated unfairly because taxpayers who are less compliant are offered tax amnesty with lower tax rates than obedient taxpayers.

  • The program could lead to an attitude where taxpayers deliberately do not pay taxes immediately, hoping that there will be a tax amnesty in the future. In addition, taxpayer compliance is influenced by, among other things, legal certainty in the application of sanctions. If there is uncertainty in the application of sanctions, then taxpayers tend to disobey the applicable provisions. This also applies to provisions in the field of taxation.

  • Tax amnesty is contrary to tax law enforcement. Under the principle of law enforcement, especially in the realm of tax law, taxpayers who are less, or not, obedient in the implementation of tax obligations should be subject to sanctions as stipulated in the respective tax law. Tax amnesty contradicts this principal, because non-compliant taxpayers could eventually get away with more favourable terms. It could be said that, with the existence of tax amnesty, law enforcement programs cannot be carried out.

Apart from the negative side of Tax Amnesty II, the government of Indonesia, especially the Directorate General of Taxes, still hopes that the positive side of this program will have a greater impact than the negative side.

The monetary authority still expects that many taxpayers will participate in this next round of tax amnesty, especially in the area of repatriation which has been deemed unsuccessful in Tax Amnesty I.

All in all, the main issue is that Indonesia still needs a lot of funds to fill the state budget, considering the impact of the COVID-19 pandemic and long-term development goals.

Susy Suryani

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Managing partner

Suryani Suyanto & Associates

T: +62 21 290 35 889

E: susy.suryani@ssas.co.id

Susy Suryani Suyanto is the managing partner of Suryani Suyanto & Associates. She has become a tax specialist in matters relating to dispute resolutions, with a proven track record in assisting multinational corporations listed in Indonesia and overseas stock exchanges.

Susy has more than 11 years of experience as a tax consultant with Arthur Andersen and EY and has attended various trainings, including tax manager training in Chicago. She serves as the chairperson and in various leadership roles across tax chambers and forums in Indonesia.

In addition to holding bachelor’s degrees in accounting and law, Susy holds a masters’ degree in law from Padjadjaran University, where she graduated with a summa cum laude.


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