TEMPO.CO, Jakarta - The government must reset its priorities with regards to its tax amnesty program. If it aims at those who stash away funds in overseas banks as initially planned it should not expand the target to small and medium businesses as has been campaigned vigorously in recent weeks.
The finance ministry deserves a pat on the back when the program's first period ended at the end of September. With around Rp100 trillion in tax revenue, Rp3.991 trillion in asset declaration and Rp137 trillion in repatriated funds, it is not an overstatement when President Joko Widodo declared that Indonesia's tax amnesty program was 'the most successful in the world's history'.
But it is still not enough. Facts show that participation in the program is still low; only 2.5 percent out of a total 20 million taxpayers.The President hopes to see a surge in the second period, which runs till the end of this month. So he continues to visit and reach out to communities, relentlessly campaigning for the program.
This is understandable, given the targets of Rp165 trillion in tax revenue and around Rp1,000 trillion in repatriated funds. But what remains unclear is the government's priorities: to secure the budget, or to maintain the balance of payments? Each have determining different targets; tax revenues or repatriated funds.
In any case, these two different targets cannot be achieved simultaneously. By expecting massive tax revenues, the government cannot hope for a huge repatriation of funds, and vice versa.
As such, campaigns for fund repatriation should be directed at foreign account owners, not small and medium businesses. No less important is the fact that there are no sufficient investment instruments yet to absorb a massive amount of fresh repatriated funds. As the saying goes, 'money knows no nationality'. Without adequate investment instruments in place, fund owners are not likely to bring back their money to the country.
If the government is realistic and just hopes to increase tax revenues, it should consider whether the Rp165 trillion target is achievable or not. It is only two weeks away before the second period ends. Looking at the rather flat trend towards the end of September during the first period, the revenues near the end of the period cannot be expected to reach the target.
Indeed, the total collected revenue so far amounts to 60 percent of the total target and there is still time until March next year to rake in more. However, to fully control the budget and to prevent political instability, the government should start thinking of other means to fix the budget shortfall. (*)
Read the full story in this week's edition of Tempo English Magazine
