Tax Amnesty program has ended on 31 March 2017, which is 9 (nine) months since it was released in the mid of last year. However, the side effects are still experienced by taxpayers until now and even until the following political years.
We should admit that the post-tax amnesty policy has resulted in new outcries among taxpayers. Government Regulation Number 36 Year 2017 is the igniter. This regulation emphasizes the imposition of final Income Tax on certain income in the form of net assets that have not been reported or under-reported by taxpayers, both in Asset Declaration Letter (Surat Pernyataan Harta/SPH) and Annual Income Tax Return.
There are some types of net assets that become the objects of this regulation. First, additional net assets as a result of failure of fulfilling domestic assets repatriation or investment commitment for 3 (three) years at minimum. Second, net assets that have not been completely disclosed or under-disclosed in Asset Declaration Letter related to Tax Amnesty program. Third, net assets for acquisition period from 1 January 1985 – 31 December 2015 that have not been reported in Annual Income Tax Return. These assets may be revealed through Tax Authority’s findings or based on correction letter to Tax Amnesty Certificate (Surat Keterangan Pengampunan Pajak/SKPP).
Taxpayer’s assets that have not been reported or under-reported will be subject to final Income Tax with rate of 30% for individual taxpayer; 25% for corporate taxpayer; and 12.5% for certain taxpayer. The certain taxpayer as stated in Government Regulation Number 36 Year 2017 constitutes entrepreneur or independent worker with revenue of IDR4.8 billion at maximum per year or taxpayer receiving income of IDR632 million at maximum other than from business or independent job.
In other words, by the prevalence of this Government Regulation, Tax Amnesty participants are not totally free from tax sanction if in fact, the assets other than cash are under-declared or do not match the Directorate General of Taxes (DGT)’s assessment result. Moreover, if there are assets that have not been reported, surely it will be processed further.
Law Consequences
At least there are 3 (three) conditions regulated in this Government Regulation with different legal consequences. First, for Tax Amnesty participants whose assets are discovered undeclared in the future in Asset Declaration Letter. If it is proven, the related person is subject to final Income Tax plus administration sanction of 200%.
Second, for Tax Amnesty participants failed to fulfill domestic repatriation or investment commitment of 3 (three) years at minimum. As a consequence, the additional net assets that are disclosed in Asset Declaration Letter are deemed as income for fiscal year 2016 and will be subject to Income Tax as well as sanction pursuant to the prevailing regulations (2% per month).
Third, for taxpayers who did not sign up for Tax Amnesty and whose assets are discovered undisclosed in Annual Income Tax Return. As a consequence, the net assets discovered are deemed as income at the time of the finding and will be subject to Income Tax as well as sanction pursuant to the prevailing regulations (2% per month).
Inconsistency
Referring to the previous provision, the issuance of Government Regulation Number 36 Year 2017 is the mandate of Article 18 paragraph (1) of Law Number 11 Year 2016 on tax treatment upon additional income in the form of net assets that have not been disclosed or under-disclosed by taxpayer in Asset Declaration Letter.
From the article above, the phrase of “...under-disclosed...” potentially triggers new problem. Because it may create space for the tax authority to reassess the conformity of assets amount or value disclosed by Tax Amnesty participants. There is a risk of misinterpretation that may give rise to dispute between Tax Authority and taxpayer.
This phrase is emphasized through DGT Instruction Letter Number INS-05/PJ/2017: “In terms of exploration of tax revenue potential, the summons for taxpayer who has participated in Tax Amnesty program may only be performed by the Head of DGT Regional Office.”
No matter how high the Tax Authority level is, it obviously contradict the spirit of Tax Amnesty that gives Taxpayers right to determine their own assets fair value. The Elucidation of Article 6 paragraph (4) of Law Number 11 Year 2016 states that: “...The ‘fair value’ as stated is the value that describes the condition and circumstance of the similar or equivalent assets based on taxpayer’s assessment.”
As an illustration, if an individual taxpayer has saving account in a bank amounting to IDR1.2 billion but the amount that is disclosed or reported to the Tax Authority is only IDR1 billion, the discrepancy of IDR200 million is deemed as additional income that will be subject to final Income Tax of 30%.
So, how if the assets that have not been disclosed are non-current assets such as land or building? For example, from the total land area of 5 hectare owned, taxpayer only reports the land possession of 1 hectare with market value estimation of IDR1 billion. So that, the discrepancy of assets that has not been reported is deemed as additional assets that may be subject to final Income Tax based on assessment result of DGT.
Or, for example the taxpayer possesses 10 kilos gold but only reports it as 1 kilo gold. So, the 9 kilos will be deemed as additional income in which the value determination is conducted ex officio by DGT.
The next question, how is the conformity of additional assets value to which assessment may be conducted by DGT? Is it price base or quantity base?
If DGT assesses the discrepancy of quantity of assets that have not been reported by taxpayer, it is surely acceptable because it is their domain to audit any non-compliant taxpayers. However, if the value of Tax Amnesty assets that has been assessed and reported by Taxpayer is questioned, it is inconsistent. Because Tax Amnesty Law has explicitly given right to taxpayer to determine their own fair value of assets, but does not authorize DGT to reassess the assets that have been reported by taxpayer.
This case is not something impossible to occur. It maybe because of multi-interpretation, or deliberate act of Tax Authority to achieve high target of revenue. If the non-compliant taxpayer is targeted, it is not a big deal. What if the compliant Taxpayer becomes the target? it will become a bad precedence for DGT.
There has been affirmation from DGT Higher Level Officer that the asset value that has been reported by Tax Amnesty participant will not be argued. Still, how valid the statement is to guarantee that the outcries do not occur in the field?
For taxpayer, surely there is no option other than to comply with the tax provision. Incomprehension of taxation regulation, which currently becomes an issue for taxpayer, is our “homework.”
Last, the author hopes that the tax may re-function as a means of development and the people’s welfare in which the imposition procedure is simple and is not burdensome.***
*Short version of this article has been published in Daily Bisnis Indonesia, Thursday, November 9, 2017.
