Carrying out duties such as services, supervision, law enforcement, and state revenue collection is not a walk in the park. Especially in the time of the Covid-19 pandemic and the economic crisis. Askolani, Director General of Customs and Excise, has a story about how his institution faced all of these challenges. Starting from working normally while others "work from home", carrying out intensive supervision and taking action against the spread of illegal goods skyrocketed during the pandemic, to getting a headache due to fraudulent actions on behalf of his institution.
Here is a snippet of MUC TaxGuide's conversation with the Director General of Customs and Excise Askolani in his office, Thursday, 27 October 2022.
In the last two years, customs and excise revenues have increased in times of unfavorable macroeconomic conditions. Is it purely due to the blessing of commodity prices or is there another factor?
It's a combination. First, from the economic side or the rise in global commodity prices such as oil, coal, and CPO, which increases the company's income or profit and affects the increase of tax payments, Non-Tax State Revenue (PNBP), and customs.
The second factor is that services and supervision continue to run normally during the pandemic, as well as reinforcement or reformation within the DGCE, combined with online services to speed things up. We also continue to seize illegal products, which has the deterrent effect of preventing people from engaging in an unlawful activity and encouraging them to transact legally.
The effect is not only on revenue, but also exports and imports that increase up to double digits or 15%-16% in 2021. That is one of the pillars of the economy returning to positive growth at 3% of the prior negative growth, also one of the reasons of tax revenues increased significantly and Indonesia being one of the countries that continue to survive.
If the commodity-based economic sector contribution to revenues increased, what about other non-commodity sectors? Is there any industry that experienced a decline during the pandemic?
Of course. After all, not all imports are subject to import duties due to FTAs ??with zero tariffs. Speaking of sectors, import duties from the construction sector have negative growth. From January to September 2022, the growth was minus 24%. Transportation also fell, but wholesale trade rose; agriculture, forestry, and fisheries also increased. Not all sectors of our economy grow fast. One example is construction, which is still lagging behind in recovery.
Apart from the normal service operation, what other roles did DGCE take to help the economic recovery?
DGCE has played significant roles since 2020 when the pandemic first started. One of the ways is to maximize the fulfillment of health equipment for handling the pandemic. We have worked with the Ministry of Foreign Affairs to ensure that not all PPEs (Personal Protective Equipment) made in economic zones get exported, including [the PPEs produced by] Korean companies. We also provide customs facilities for medical devices to vaccines, namely exemption from import duties. Until now, the exemption facilities persist, but specifically for medical devices that are still needed. We also accelerate the import services of medical equipment with much faster mechanisms than the others. Moreover, with the use of an online rush handling system, the import process can only take a few hours, shorter than usual.
Has the potential loss been calculated due to the incentives during the pandemic?
Before we provide incentives, we have calculated all the costs [to be incurred] or import duties that will not be received. It has become a policy for a state budget deficit at 5%-6% of the GDP. We are obtaining revenue from other sector(s) [not affected]. If I'm not mistaken, specifically for medical equipment, the incentives can be up to IDR 5 trillion, a combination of import duties and PDRI (import taxes).
The highest incentive was in 2020 while in 2021 the incentive was below IDR 1 trillion. But it's not only facilities, the provision of services is also fully supported.
What has DGCE done to ensure the effectiveness of providing customs facilities?
We carry out intensification, monitoring, and evaluation of the provision of facilities. We mitigate the risks in areas that receive the facilities. Therefore, we are confident that we can consistently provide better services, as well as facilitate and accelerate export-import services and the economy.
We also believe that our service improvements can increase investment, add foreign exchange reserves, and optimize revenue, both from import duties, export duties, and excise.
In 2023, the global recession is predicted to become a new shock, how can DGCE ensure that customs services and revenue are not disrupted?
The so-called new shock is merely from the economic and macro perspective, not from service perspective. So, all these improvements have nothing to do with the crisis. This is our basis. I believe efficiency can compensate for the economic slowdown. Take PEN (National Economic Recovery) program as an example. Without PEN, poverty may worsen, economic progress may slow down. With PEN, those problems can be suppressed. Just like us, improvements in terms of customs and ports will help economic efficiency. Indeed, the economic challenge is not only the port, but we have related ministers who have their respective functions to encourage others.
How about next year's cigarette excise policy?
We strive to consistently run the cigarette’s excise according to the roadmap. We have a standard for the adjustment of excise rates on tobacco products by looking at many factors, including the inputs from stakeholders and WHO from the health side.
Consideration from the health side encourages the raising of the tariff as high as possible. From the perspective of the industry, we need to bear in mind the difference of cigarette industry in Indonesia from other countries—how it is massive, labor-intensive, and having derivatives that are not only cigarettes but also agriculture, labor, and income.
All those aspects must survive. If the consideration is only from the industry side, the tariff increase is expected to be not too high.
Will there be an expansion or addition of excisable goods?
In the plan of 1-2 years ago, [we would like to add] plastic. Yet the pandemic came, and we saw the condition of industry and society in the middle of economic recovery. Therefore, until 2022, we could not execute it yet. In 2023, we will continue to prepare the regulations [for plastic excise], including sugar-sweetened beverage excise. However, again, in the course of time, we will ensure the conditions first. Just like in 2022, we have prepared [the strategy], but the momentum is not right to implement plastics excise tax. We'll see how the situation unfold. We must remain vigilant while at the same time anticipating global and domestic economic conditions. So, it really depends on the conditions of 2023.
Regarding the Job Creation Law and the Harmonized Tax Law, what are DGCE's duties?
The mandates of the Job Creation Law from the customs and excise perspective are: (1) emphasizes of excise collection in the Free Trade Zone area in accordance with provisions in the field of excise; (2) additional types of Special Economic Zone (SEZ) in health and education fields; (3) provision of facilities for importing consumer goods for non-production and processing SEZs; (4) policies of export-import regulations, prohibition and restriction of goods; and (5) fiscal incentives for micro-enterprises.
Regarding the Harmonized Tax Law, we are mandated to implement an ultimum remedium in the field of excise. Law enforcement in the field of excise is directed to restorative justice—not directed to crime, but to administrative sanctions, and more about education and preventive action. Regarding the implementation, we have to make a Government Regulation (PP), which is still in the preparation process, and hopefully, will be finished this year. We are also preparing the Minister of Finance Regulation (PMK).
Therefore, we are discussing excise taxes with the Attorney General's Office, the Ministry of Law and Human Rights, the State Secretariat, and other relevant agencies.
What about consignment control in the booming of social media and e-commerce era? What are the challenges in dealing with the current retail model?
In practice, these consignments are sometimes used for illegal purposes as well. The goods are small in size but massive in quantity. This is the challenge for us. While the value is not much, our treatment covers checking [the goods] and optimizing all the tools. We're just trying to be consistent. We serve and keep a close eye as usual. Thank God no marketplaces nor consumers complain. However, as a result of the massive trading through the marketplace, frauds on behalf of DGCE are everywhere. Yet, it becomes another challenge for us.
We also detected that people sell illegal goods in the marketplace, for example, cigarettes and liquor without excise stamps. Thus, we conduct cyber patrols, not only on the marketplace but also on Instagram and Facebook. That is just how far we need to keep an eye on and how far we need to develop.
Our vigilance must continue to increase. We have to serve a lot of shipments, but then fraudsters make benefit of such situation.
What kind of fraud?
The motives vary. For example, upon the incoming goods, there are threats on behalf of DGCE saying ‘A fee is required if you want to issue the goods, you have to transfer [money[, and so on’. Amazingly, this swindler can find out the item and the person making the order. We don't know how the swindler could get the information. On WhatsApp, their profile shows a picture of DGCE's officer in a uniform. Such thing is recurring every month. This is another challenge for us. Even my own two children have almost been scammed.
What did DGCE do to take action on it?
We cannot take legal action due to no complaints. Most of the consumers don't report nor file a complaint. We need to coordinate and remind the marketplace about data confidentiality. For the marketplace that is an official company, we can make a call and remind them not to facilitate the sale of illegal goods.
From the results of our cyber patrol, we also find many illegal cigarette sales. Not only on the marketplace, but also on Instagram and Facebook. Those sales were small in volume. We tried to connect the dots and finally found the warehouse. We searched their warehouses and took action on some of them.
How to prove that fraudsters who call consumers are not DGCE employees?
We have to reaffirm that it is not the duty of DGCE employees to report retail sales to customers. We also share the information via Instagram and Facebook so that the public does not believe any person claiming to be a DGCE officer, as it is impossible for DGCE officers to contact the customer. I will also urge the marketplace to take responsibility because the fraudsters can also be there [part of the marketplace]. There should be an advertisement in the marketplace reminding consumers to be careful and not to respond to individuals claiming to be DGCE officers.
Likewise, data confidentiality must be upheld. Those are the things we would like to remind the marketplace of. The point is, we must go deeper into it.