To make sure that
Indonesia has good economic stability and attract more investor to come due to
low-risk business climate, the government must secure to have the good revenue.
And as developing country, Indonesia still depends on tax payment to secure at
least 70% of the total revenue. So, even tax might sounds scary for some
business holder, we cannot deny the important of tax payment for increasing
growth of the country as well as stimulating more conducive situation for
business holder itself.
Like a love and hate
relationship, however, the relationship between business holder and tax
institution will not be that simple. They affect each other with complex
regulations here and there. Starts from the simple way, tax becomes one of important
variables for doing business.
However, according to
World Bank Data (2018) as shown in figure below, stated that Indonesia still in
the low rank (73rd compare to Malaysia in rank 15th as
neighboring country), for easiness of doing business. This fact relates with
the mandatory task of business owner to understand the complexity of tax
regulation and taxpayers services before they build their business in
Indonesia.
Figure 1. Ease of Doing Business in Indonesia
Unfortunately, despite the
easiness for doing business in Indonesia has been improving a lot for some
cases, i.e. for starting business, registering property and getting credit, the
easiness for paying taxes remains low and even decreasing (figure 2). But at some point, tax payer services, can be one of
the strongest reasons for tax compliance rate. It leads us to the conclusion
that tax payer services deserve a lot of attention to make sure the business
holder feel easier and comfortable to pay tax.
Figure 2. Variables Ease of Doing
Business in Indonesia
One first thing the
business holder should know that everyone who will start doing business must
have a NPWP and beforehand, business entities should fulfill the requirements,
like deed of establishment and business license.
To achieve good tax payer
service then we need to know the rights and obligations of taxpayers. Based on OECD’s
Committee of Fiscal Affairs Working Party Number 8 (1990) there are six
taxpayers’ rights, i.e. right to be informed, right of appeal, right to pay no
more than the correct amount of tax, right to certainty, right to privacy,
right to confidentiality and secrecy. In fulfilling the rights of taxpayers in
the form of certainty and to pay no more than the correct amount of tax,
Directorate General of Taxation (DGT) had formed tax audit position and Indonesia
implement self-assessment system in collecting tax. The correct paid amount of
tax is one of the taxpayers’ mandatory and responsibility. If something
happened, for instance there are overpaid tax refund requests or un-clarity in
the report or doubt on the correct tax reporting, etc, taxpayer should be ready
to be audited.
As one of the tax auditor
in Indonesian tax office, I have been directly facing some cases when dealing
with taxpayers. For 8 years I am working at DGT, I realized some cases happened
repeatedly, not only for me but for all of the officers. In my humble perspectives,
these four cases possible for being obstacles to maximize Indonesia’s main
state findings resource, therefore urge to meet the solution:
1. Due to lack of information and/or people’s awareness, these processes of
registering NPWP sometimes lead to some cases. The cases often occur for
example are taxpayers’ misunderstand NPWP to not have an inherent obligation, NPWP
is not the same as passport. NPWP has an inherent obligation as long as the
owners is still there, like reporting obligation.
Moreover, tax reporting in
Indonesia not all can be done online yet and creating more hassle for tax payer
since they should back and forth for filling the manual reports in the tax
office.
2. When taxpayers have no income, they tend to not make tax reporting. This
was a problem when the taxpayer proposed deleting NPWP for business entities
that were no longer operating. As we know, economic growth of the country is
always fluctuating, as well as the business world. According to tax regulation,
Per-20/PJ/2018, deleting NPWP must go through an audit process after all tax obligations
is completed. Taxpayers often reject to make tax reporting while there are no
business activities. Nevertheless, no tax reporting means responsibility to pay
fines or receive sanction from taxpayers.
3. Every business entities have a different life cycle. According to
Kondratiev in his book tittled “The Major Economic Cycles” (1925), the long
cycles had three stages: expansion, stagnation, and recession.
Figure
3. Economic Life Cycle
Audit process in newly life of business entities must be different with the
peak one. As well, audit process of entity closure has a specific treatment. Equal
treatment of audit process in various type business life cycle will undermine
business development in Indonesia. In other hand, inappropriate audit process
can create tax potential loss. As we know, tax is the main source of state
funding in Indonesia. Recently, there is new tax regulation related to
small-scale taxpayers, PP 23/2018. The treatment for newly business entities using
PP 23 or the PPh Act is still a matter of discussion between taxpayers and tax
officers. Normally, taxpayers will use the most profitable regulations for
their newly developed businesses.
1. Another problem is unsynchronized data among tax service offices across
regions. Taxpayers who do business usually have branches in various regions and
each branch has responsibility to report each other. These miss linkage lead to
the case of double taxation if tax payer services are not supported by adequate
data synchronization. The audit process can be repeated in various branches with
repeated document requests.
So, what makes different
when we are doing business in other area in OECD member country? Australia for
example with good rank in easiness of doing business especially in paying taxes
(rank 18), has a relatively complex federal tax system that includes an income
tax, a capital gains tax, a consumption tax (the GST) and a number of
employment-based taxes (for example, fringe benefits tax). Australia also has a
number of State/Territory-based taxes, such as stamp duty, land tax and payroll
tax, and one of the keys to doing business in Australia is understanding how
these taxes interact and how they affect business structures and transactions.
(Minter Ellison, 2018)
Indonesia which does not
have as complex tax regulations in Australia need to improve skills in
understanding tax rules that we have. This understanding must be adjusted to
the existing economic conditions and types of taxpayers. Furthermore, another
important role of tax services includes the process of understanding existing
tax regulation for the taxpayers. For example by providing consultancy
regarding taxpayers treatment for who just run their business. On the top of
that, building good communication and cooperation between tax auditor and taxpayers
should be the key factor to make sure the process is running well. While the
tax auditor guarantee they are conducting the job well, the taxpayer should
understand that providing accurate data and time is crucial for audit process
otherwise it will complicate taxpayers itself and hinder their business as the
consequence.
DGT needs to take more
concern in fulfilling taxpayers rights according to OECD directives. Self-assessment
system initially is made to create easiness for taxpayers to fulfill their
obligations. So, it should continue to support the ease of doing business in
Indonesia. The standard of audit process at DGT needs to be continuously
improved so that tax payer services will run well without eroding the potential
tax.
I believe by taking this
course I will gain more understanding the complex realm of doing business and
tax payer services as my field. I will be more careful and professional in
conducting tax audit especially in auditing taxpayers in newly business and in
end cycle of business. After completing this course, I hope that tax auditors
in Indonesia especially myself will do the duty effectively and professionally
without reducing comfort of businessmen in Indonesia. Instead, tax auditor can
keep the correct tax reporting by taxpayers in maximizing tax revenue. So that,
tax services can boost doing business in Indonesia and improve economic growth.
Will never ends in me I
will do share this knowledge to my colleagues in my office. In regular forum
counseling on taxpayers by the tax office needs to be informed of new relevant knowledge
related to tax services for the business. So, all of tax auditors, account
representatives, and tax office concern about the importance of taxpayers services
in boosting tax revenue, especially businessmen taxpayers. This knowledge is
important too to be shared in tax auditor forums regularly, and I am eager for
that.
Furthermore, the global networks
from various countries with their various experiences can provide me more
resourceful information to be implemented in DGT office. If I can imagine, by
become an effective-efficient DGT and high standard in taxpayers services,
Indonesia will become the most favorable country to do business, alongside the
attractive beauty of Indonesia’s nature.
References:
OECD Committee of Fiscal
Affairs Forum on Tax Administration. 1990. Taxpayers’
Rights and Obligations. Centre for Tax Policy and Administration.
Market Business News. 30th
of Jan 2019. https://marketbusinessnews.com/financial-glossary/kondratiev-cycle/.
Minter Ellison. Doing
Business in Australia | Taxation. 29th of Jan 2019. https://www.minterellison.com/articles/doing-business-in-australia-taxation.
World Bank. Ease of Doing Business in Indonesia. 28th of Jan 2019. http://www.doingbusiness.org/en/data/exploreeconomies/indonesia.
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