Abstract
Tax amnesty programs are often used by governments to improve tax compliance and to increase tax revenue. However, the policy choice to provide a tax amnesty often results in adverse consequences, including the violation of other legal rules. For this reason, the policy choice to offer a tax amnesty (‘tax amnesty policy’) is often controversial. The tax amnesty policy and resulting program offered by the Government of Indonesia has been criticized both because it is considered to be unfair and because it favors the perpetrators of tax evasion. In particular, the tax amnesty law offered special treatment to taxpayers who participated in the program, such as no checking of the source of funds, no checking of the financial statements reported by law enforcers, protection from punishment on the financial reports provided to the Director General of Taxation, and the requirement to pay only a small penalty. Tax amnesty programs also provide the potential for money laundering. This is certainly the case in Indonesia. In addition, tax amnesty programs weaken law enforcement in Indonesia; in particular, in the areas of corruption and money laundering. This is because law enforcement officers cannot investigate the perpetrators of white-collar crime that benefit from the tax amnesty program. Under the terms of the tax amnesty program, the financial data is not accessible by them.
Highlights
Tax is a major source of revenue for many countries, including Indonesia
The first is the absence of a process of checking or tracking of the source of funds used by the taxpayer in the tax amnesty program; secondly, the tax amnesty law inhibits the development of the whistleblower system in Indonesia; and the tax amnesty law hampers the work processes of other law enforcement agencies
The problem that arises here is the potential for money laundering in the policy of tax amnesty and repatriation of assets implemented by the Indonesian government, because white collar criminals, perpetrators of corruption and drug smugglers could take advantage of the tax amnesty and repatriation of assets to “whiten assets” belonging to them, and have the potential to profit from the investment return on assets that are repatriated to Indonesia
Summary
Tax is a major source of revenue for many countries, including Indonesia. Tax in Indonesia has three main functions; it is the source of state income, it is a tool of policy regulation, and it is a means of income redistribution (Direktorat Jenderal Pajak 2013). The low number of taxpayers when compared with the productive age of the population of Indonesia means that the Indonesian government is not maximizing the potential revenue from taxation. This has led to constraints in infrastructure development in Indonesia, and to an increase in Indonesia’s foreign debt. The tax amnesty program, as envisioned by the Indonesian government, included some fundamental flaws, and potentially violates other laws in Indonesia.
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