President Joko “Jokowi” Widodo is seeking ways to strengthen the prevention and control of tax evasion and money laundering. On March 21, 2016 the President held a closed-door meeting with a number of related state institutions to discuss this issue. The meeting produced a three-step action to be prepared immediately, namely:

I. The Center for Financial Transaction Reporting and Analysis (PPATK), the Directorate General of Customs (Ditjen Bea Cukai), the Directorate General of Taxation (Ditjen Pajak), the Police, the State Intelligence Agency (BIN), and the National Narcotics Agency (BNN) are required to work together in the sharing of data and information related to taxpayers.

All institutions were ordered to use the same data. The shared data will be followed up as a benchmark to oversee tax objects. The preliminary data would be derived from the Ditjen Pajak and PPATK. The order was received well by the institutions. PPATK expressed their readiness to supply data to the Ditjen Pajak. The PPATK said that it received 150,000 reports of financial transactions on a daily basis, which can be developed further to prevent the potential for deliberate tax evasion by specific taxpayers.

The order is also in accordance with the provisions of Government Regulation (PP) No. 2/2016 related to the obligation of State Institutions and Private Institutions to submit data and information to PPATK. With this increased authority the PPATK will be able to obtain data from any party to be analyzed. This data can then be used by the Ditjen Pajak and other supervisory institutions.

II. The Ministry of Finance was instructed to immediately improve information management facility so it can be integrated to support the development of technology. Data management would no longer be conducted manually, and thus potential errors in data management can be reduced.

In response to this order, the Ministry of Finance has promised to develop information technology facility that can integrate information systems in the Ditjen Pajak and the Ditjen Bea Cukai. The development of the data management system is expected to facilitate all institutions when accessing data to carry out surveillance when dealing with tax or customs. For instance, if there is a transaction at customs, the officer can immediately determine the tax implications, and vice versa. In this regard, the Government believes that improvement of information systems and technologies will have a positive impact and raise the level of tax ratio. To date, Indonesia’s tax ratio stands at 11 percent. In the future, the President wants the tax ratio to be increased above 12 percent, up to 15 percent if possible.

III. The President asked the law enforcement agencies and the Ministry of Finance to prepare for the changes in the financial and taxation system in 2018. Later, the tax system should be very open so the data on deposit money in any country would be visible. These changes are closely related to law enforcement.

In order for the enforcement against the criminal offense of tax evasion and money laundering to run well, the President demanded synergy between institutions. On the supervision of the sectors prone to money laundering—be it related to drugs, illegal trading, transfer pricing, and many more—the law enforcement agencies should involve Bank Indonesia (BI) and the Financial Services Authority (OJK) in its legal process. The President wants sectoral ego gone. This, in our opinion, is the tallest of all orders. We shall see whether or not bureaucrats can comply. 

By Pradnya Paramitha

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