Questioning Procrastination and Non-Compliance in Reporting Tax Returns

Asep Munazat Zatnika, Researcher MUC Tax Research Institute | Monday, 22 March 2021

Questioning Procrastination and Non-Compliance in Reporting Tax Returns

Something important should have come first. However, the opposite is often the case. In fact, "if it can be later, why now?" seems to be no longer a joke but has often become a habit. This procrastination attitude is reflected in most taxpayers who usually delay the reporting of annual Income Tax Returns (SPT PPh). This bad habit affects tax non-compliance.  

Procrastination is the nature of some people who typically delay obligations or important things and prefer to put less important activities first because they are more fun. Procrastination is a form of self-management failure characterized by the irrational delay of tasks despite potentially negative consequences (Roman Prem, 2018). 

This habit of procrastination has not changed much for a long time throughout human civilization. In fact, since the 8th century or 800 BC, the Greek poet Hesiod cautioned not to “put your work off till tomorrow and the day after.”?In one of his works, Hesiod told a story of the ancient Greek leaders' concern towards their people who had difficulty complying with and delaying obligations, possibly including paying tribute. 

Centuries later, in the era of modern taxation, the attitude of procrastination still seems to be one of many contributing factors to low tax compliance. Delaying the Tax Returns report, for example, may not be intentional, but rather because some taxpayers are unwittingly distracted from less important but fun things. 

Especially in today's digital age, where social media is becoming the daily "food" of its citizens. The habit of looking at Instagram or Facebook is very likely to defeat the desire to carry out Tax Returns reporting obligation despite the fact that it can be done online. Non-compliance can be even worse if the Tax Return reporting is still using conventional methods or coming to the tax office. 

Questioning Non-Compliance  

The scope of tax compliance is extensive. Starting from calculating taxable income, paying payable tax, to disclosing everything in Tax Returns are all done independently or based on self-initiative in accordance with the Indonesian tax system that adheres to the principle of self-assessment. 

The easiest way to verify taxpayer compliance is through Tax Return reporting. Year over year, the tax compliance ratio has actually improved although it is still far from perfect. 

In the last three years, for example, the ratio of compliance of Income Tax Return submission to the number of taxpayers obliged to report was 71% (2018), 73% (2019) and 77.6% (2020). Ideally, of course, all registered taxpayers report their Tax Return (100%). 

Well, procrastination or the habit of delaying Tax Returns reporting until it approaches this deadline can be an issue.  

For instance, near the deadline for reporting individual Tax Returns (31 March 2021) or to be precise as of 10 March 2021, the number of taxpayers who have fulfilled their obligations is only 30%. In fact, this year's tax compliance ratio target is 80% of the total 19 million taxpayers who are required to report Tax Returns. 

Understanding the Causes! 

There are always consequences related to the habit of delaying anything, including in terms of annual Tax Returns submission. Administrative sanctions in the form of fines await every taxpayer who is negligent, forgets or exceeds the predetermined deadline for reporting Tax Return. The fine may not be much, only IDR100,000 for individuals and IDR1 million for corporate taxpayers. But imagine the chain effect related to other public services that are at risk of disruption, particularly those that make Tax Return reporting compliance a prerequisite. It seems insignificant not to report Tax Return, but the possibility of a problem for accessing some public services is surely not a fun thing.  

Going back to the issue of procrastination, a number of studies have identified several factors that may be the cause of people's habit of procrastinating important things. Among others are lack of motivation, inability to self-control, vulnerability from external factors, perfectionism, disorganization, and poor time management. 

In the context of Tax Return reporting, there are a number of assumptions or factors that may lead to the low compliance of taxpayers. 

First, taxpayers do not know how to fill out and report Tax Returns. This is reflected in the results of the 2019 DGT survey, which revealed that 60.82% of respondents did not understand how to report a Tax Return. 

Then, the Tax Return form is less simple or still considered a complicated document to fill out correctly. In fact, the DGT has provided various facilities for Tax Return reporting. However, this facility is only limited to the submission and processing of the report. 

Again, this is the problem of tax dissemination that is not evenly distributed or cannot be dealt with by all groups. 

If the taxpayers are serious and want to do some effort, they can simply visit the DGT website because it provides quite clear guidelines. 

Many also feel that they no longer need to declare their Tax Returns because they have already paid taxes. This assumption usually arises among formal workers, whose income has been immediately withheld by the employer. This misconception has often become a justification for a number of parties when faced with complicated Tax Return reporting procedures because of the misunderstanding. 

Or, perhaps because the fine is too small. It is a dilemma, being given heavy sanctions or large fines is not appropriate, while leniency or generosity can also damage the credibility of law enforcement. 

Technology illiteracy can also be the cause of taxpayers not understanding on how to report Tax Return online via e-filing or e-form. As a result, reporting the Tax Return directly to the tax office is still the best way for this group of taxpayers — who are not small in number. In this case, the issue can be different, especially for taxpayers who live far from the tax office or in remote areas. Besides having to pay taxes, the taxpayers must report the Tax Return, plus they must spend time and effort or money to come to the tax office. How Complicated!  

The last reason that is most unacceptable is laziness. This lazy nature can appear among people who are apathetic to the state management. Usually, it is because of the lack of benefit from the tax collected. It may be due to the fact that public services are found unsatisfactory or seeing the inadequate basic infrastructure conditions, such as damaged roads, flooding due to chaotic irrigation systems, or difficulty in getting access to clean water and energy. 

Demanding for Proof, Not Promises 

Not all of the reasons mentioned can be justified, but most are true. This is where the seriousness of the government in managing the state budget is put to test as procrastination or the habit of delaying obligations is not just an individual problem, but in some cases, it has been institutionalized. 

In the context of fiscal management, for example, budget absorption by a number of Ministries/Agencies is usually only accelerated at the end of the year. If the focus is only in carrying out obligations or fearing next year's budget to be trimmed, it can be imagined how the final results and benefits of the country's programs and projects would be. Of course, not all Ministries/Agencies is so, and the Ministry of Finance—in this case, the DGT—does not seem to be included in the list of institutions that used to do the “Last Minute Working.”  

The point is, people need proof, not just promises.  For example, if the promise is to provide social assistance (bantuan sosial) in cash of IDR300 thousand per month, then don't cut it.  

For the DGT, the proof can be by further optimizing the dissemination of tax policy and Tax Return reporting guidelines. The dissemination material for people who are lazy because they do not understand and taxpayers who are disappointed with services and bureaucracy, of course, must be distinguished. So far, the DGT has been quite creative in disseminating policies and convincing the public that taxes are important for development.  

In addition, the DGT is also required to be adaptive to the development of digital technology. Especially when it comes to providing a tax technology system that facilitates the use of online tax administration services and processes. Besides, a capable tax technology system is also required for tax officials in enforcing the rule of law. This is indeed not a simple matter because it requires research and must be supported by big data. But it is not impossible. If a start-up can do it, so can the state. 

If all those things can be done, the tax authority will not only contribute to the state finance but also be considered to have played part in eroding the procrastination of citizens. 

Going back again to the Tax Return, if you can report it now, why should be later? Do not turn it the other way around! 

*The article was published in Kumparan.com, on 17 March 2021. 



Disclaimer! This article is a personal opinion and does not reflect the policies of the institution where the author works.


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