Reform is not only a phrase repeatedly spoken when it comes to policy change. It is rather a mandatory to be able to adapt with social demands. It is like a taxation system in Indonesia, which is far from perfect, despite its frequent refinement.
Like a relay race, the baton of tax reform should not stop. This is a commitment to maintain and to do across generations. This is also reaffirmed by Minister of Finance’s Special Staff for Tax Compliance as well as Chairman of Taxation Reform Team, Suryo Utomo in a seminar celebrating 71st Hari Oeang (Indonesian Banknote Day). The excerpt of his full statement is as follows:
How is the development of taxation reform?
Reform is not something that can be done at a time. Because, tax reform is something that runs over time. Like us human who always improves each day. The same applies to tax institution that always needs improvement. With a better institution, there will come a better interaction with the taxpayers, which in the end will give us revenue.
If we have collaborated with Directorate General of Customs and Excise (DGCE), as well as with other ministries or institutions, in my opinion tax revenue is not something impossible to improve. But now, how can we collaborate? We respect the rights of each party to perform their respective duties and functions. We have the responsibility to collect state revenue by not creating any uproar, by providing the best service to taxpayers to comply with tax obligations.
What shall be prepared to make the tax reform successful?
Let’s have a little flashback to year 2016 and 2017. In the latest two years, there has been something moving and dynamic regarding taxation policy. Firstly, there was a tax amnesty program, in which we made reconciliation between state institution and taxpayers by issuing Tax Amnesty Law, which was ongoing for 9 (nine) months and ended in March 2017. The result deserves appreciation. That, things undetected have gone visible. It is indeed the spirit of Tax Amnesty Law. So, we reconciled, together we showed that we started from a common ground.
This Tax Amnesty Law aims to reform taxation administration system that is more equitable. By reconciliation, we have given trust to taxpayers to go hand in hand in the future in complying with tax obligations. So, the ground zero is Tax Amnesty Law.
At the end of 2016, there was Taxation Reform Team focusing on several matters such as human resources, business processes, and administration system and regulations. (They) map which parts that should be adjusted, improved. The purpose is, as I said, to position Tax Amnesty as the basis for taxation obligations. In addition, we should improve the management.
Next is how we obtain information access through Law No.9 Year 2017 on Financial Information Access for Taxation Purpose as well as the implementation of Tax Amnesty Law, Government Regulation Number 36 Year 2017. It is a package of policy that is implemented since 2016. So, it is closely related with how we perform our activities in the future. How we seriously strengthen the organization, provide better service to taxpayers and conduct better supervision to taxpayers in accordance with the rules of game of the prevailing tax regulations. Thus, approximately for the last two years we have been trying to make a preview of what is happening.
Are the organization and the human resources ready to be reformed?
We try to see that the organization, particularly Directorate General of Taxes (DGT), that is related to Taxpayer is Tax Office. We have four Large Tax Offices, 28 Middle Tax Offices, and 309 Small Tax Offices. Have the existing tax offices been effective? Honestly, in the context of reform, we try to review it.
Organization and human resources are two inseparable things, if we want to build an organization that is accountable. In principle, the essence of reform is how to make an institution that is strong and accountable. Clearly, when we talk about accountability, what we do should be functional and equitable. This is because, as I said, the essence of reform is aiming for a functional and equitable system. How we can account for our work to all stakeholders.
Therefore, we cannot work independently. Not just for institution, but how we deliver to taxpayers is mandatory for us. Engagement between us and the agents shall be tightened. We have to synchronize, not only with DGCE, but with all stakeholders.
What is the priority to be performed soon?
In principle, to obtain institution in the context of being capable of optimizing the state revenue, there are several things that should be improved: organization, human resource, business process, IT system. The database should also be improved, because we talk about a system without strong and accurate data, we cannot perform supervision to taxpayers accurately.
One more thing is the legislation. We also commit to reducing the multi-interpretation on the implementation of laws. By doing simplification and all matters to ease taxpayers in doing their activities.
Can you explain the process?
In doing tax reform, we divide it into two big groups. First group, how we develop institution, what we expect in 2020 is a really strong, accountable and credible organization established that can cover the entire geographical area of Indonesia, covering all economic potentials and providing services. That is our big hope, there. Now we try to start redesigning the organization. So, we are now talking about how this organization will become in 2020.
So we actually walk in two corridors. The corridor how we prepare or develop a better institution from the current institution, in the context of service and its details. Then, this is where we perform the activities of how we formulate the organization, and formulate the taxpayers inside the organization itself.
We cannot separate the organization from the taxpayers, and also how we run our business process according to its tasks and functions. We should avoid making the person in charge, for example, in audit work beyond his capability and capacity. Or, otherwise, one who never conducted an audit is instructed to conduct an audit.
One of the institution tasks is conducting law enforcement through tax audit. This is how we arrange the management of human resources according to the context of organization we will establish. How we process someone’s journey from one point to another. As time goes by, we talk about the mutation pattern, career pattern, and remuneration pattern. Then, how we develop our talents, to back up the organization that we really hope for. So, it is something inseparable between organization and human resources, we see that dimension.
Other than organization and human resource enhancement, what else?
In the future, the era will go into digitalization, electronification, and automation that have gone inevitable and necessary. How we address that issue? We will try to develop. We have the existing information system, to capture all information owned in terms of conducting the activities of DGT functional tasks.
During its development, we will change the information system existing since 15 years ago. For what? It is not only for our internal interests, but it is also the part of our tasks to deliver to Taxpayers. How we develop wider channel service through a new information system, how to ease taxpayers, for example, by not requiring them to submit the Tax Return manually. But with the tax withholding slip, for example employees, with the Income Tax Withholding Slip, there will be annual notice for the related employees systemically into the system. So we will reduce tasks that can be done through information system. For now the activities conducted by taxpayers are not provided yet with full service from the existing information system.
This includes the database that will be improved. We have principle to migrate into the new system. This is the previous internal activity.
How about the regulation?
To be honest, if we are talking about regulation, [for] the interaction between authority and taxpayer or customs and excise payer, the basis is the regulation. It is impossible if we make interaction without regulation basis. We currently have been discussing the revision of tax general provisions law. It has been almost 2 (two) years. Other tax regulations have been arranged and discussed in internal Ministry of Finance. So our hope is, if there is tax law that still does not reflect equitability, convenience, and legal certainty, let’s try to discuss it. The Income Tax Law, for example, and the VAT Law, what should be improved?
Here we try to eliminate provisions that are possibly, for society and taxpayers, not clear enough or raising multi-interpretation, [or] sometimes overlapping each other.
In the context of what we did during 2017, we try to make consolidation. At first we try to map, then we make consolidation. How we can synchronize the regulations with purpose to ease [taxpayers], but [the regulations] are overlapping. We will do simplification or synchronization together. We commit to creating regulation that is easy to read, understand and implement together. But we do not eliminate the rights and the obligations to pay tax or customs to the state. That is more or less our overview for year 2020.
What benefits can we enjoy in short time?
We want to give a little update about the events in 2017. There are several things, firstly, how we increase the quality of service to Taxpayers by regulation. Also, how we open new automated networks for Taxpayers to report to us. For example, the approach of online-based Tax Return. This is already open. We have also applied electronic withholding slip. How we ease the withholder to submit Tax Return. Then, how [we] allow taxpayers to participate, register easily, perform their obligations easily. So, the payment is expected to be easy as well.
After that, taxation inclusion, we really hope that the understanding of taxation is not only obtained by Taxpayers that are obliged to pay tax. We try to make ourselves inclusive for taxpayer candidates in the next 20 years. We have started to include primary and secondary school students. We also promoted “pajak bertutur” program [tax introduction program held by the government for students in Indonesia], we told stories to community. In 2017, some of this agenda has been running.
Then, in 2017 we conduct a development program of enhancement supervision and enforcement of law. We make guidelines of interaction with taxpayers, particularly in performing audit. Our audit model has changed. The audit has to be supported by good database and analysis, the audit should not be performed outside the office. Even so, there is still the possibility of checking the taxpayer’s place to obtain an overview of the taxpayer’s business process.
For business process, the supervision is also similar, by using the data we own. Then, how we deliver it to taxpayers and [how it] should be supported by complete data.
Then, how do we synergize with other parties. DGT cannot perform independently. Thus, there is financial access law. How we increase the coordination with many parties, among others with DGCE. If previously the user of customs service has Customs Identification Number, now the user has Tax Identification Number (Nomor Pokok Wajib Pajak/NPWP). In other words, the members of DGCE are the members of DGT. We have made a joint program, single identity, joint analysis, and joint operation. We, together with DGCE, run a check to customs area, ports. We also perform joint documentation, for example DGT perform the documentation of documents arranged by DGCE.
One last thing, this is what we will do in the future to increase compliance. Particularly we have arranged a concept of VAT compliance improvement. Not only VAT, but also Income Tax. We have prepared the activities that will be conducted in 2018. That is overview of reform activities running in DGT, we are not alone because we are supported by many parties.