notarisdanppat.com Tax Amnesty 2025: Opportunity or Threat for Tax Compliance?
The tax amnesty program is back in the spotlight after the House of Representatives (DPR) approved the inclusion of the draft amendment to the Tax Amnesty Law into the 2025 Priority National Legislation Program (Prolegnas). If this happens, Indonesia will hold the third tax amnesty program in the last ten years.
The plan has drawn mixed reactions, ranging from enthusiasm in certain circles to harsh criticism that the move is counterproductive. With the change of government from President Joko Widodo to President Prabowo Subianto, tax amnesty has once again become a hot topic in the national fiscal policy conversation.
Sudden Proposal in Priority Prolegnas
The Tax Amnesty Bill was suddenly proposed in a meeting of the House of Representatives Legislation Body (Baleg) on November 18, 2024 at the Parliament Complex, Senayan. Previously, this proposal was not included in the discussion list. However, Commission XI of the House of Representatives, which is a partner of the Ministry of Finance, proposed the initiative at the meeting that night.
Mukhamad Misbakhun, Chairman of Commission XI from the Golkar Party faction, stated that this initiative arose to provide new opportunities to taxpayers who have not fulfilled their obligations in the past. Although the previous government vowed not to hold a tax amnesty, Misbakhun emphasized that the change in government provides room for a different policy approach.
Commission XI plans to further discuss the scope and protection to be provided in this program. According to him, this program aims to create a way out for taxpayers who want to return to compliance without being haunted by past mistakes.
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A Brief History of Tax Amnesty in Indonesia
Since the reformation, Indonesia has held two tax amnesty programs. The first program was held in 2016-2017 under the administration of President Joko Widodo. The program was divided into three periods and managed to collect IDR135 trillion in ransom from the target of IDR165 trillion. The repatriation funds collected reached IDR147 trillion, far below the target of IDR1,000 trillion.
The second program was implemented in 2022 under the name of the Voluntary Disclosure Program (PPS). Compared to the first program, the PPS results were much smaller, both in terms of revenue and number of participants. PPS was also referred to as the last program, with the government at that time committed to optimizing the data obtained for tax law enforcement.
However, if the third tax amnesty is held again in 2026, Indonesia will have a pattern of tax amnesty every five years or so, in 2016, 2022, and 2026. This cycle gives rise to the assumption that tax offenses can be “forgiven” periodically.
Criticism and Challenges
This plan is not free from criticism, especially from taxation experts. Launching Kompas.id, Fajry Akbar, a researcher at the Center of Indonesia Taxation Analysis (CITA) assessed that the repeated tax amnesty policy has actually exacerbated taxpayer non-compliance. He mentioned that the amnesty program makes people think that there are no real consequences for tax non-compliance.
Furthermore, Fajry questioned the main purpose of this program, considering that most of the conglomerates had already participated in the first volume of tax amnesty in 2016. In PPS 2022, the number of participants and revenue decreased drastically, indicating that the potential tax revenue from similar programs is already very limited.
The same thing was conveyed by Raden Agus Suparman, a tax consultant from Botax Consulting Indonesia. He stated that tax amnesty repeatedly creates the perception that tax payments only need to be made once every five years. This is exacerbated by the low rate offered in the tax amnesty program compared to the normal income tax (PPh) rate.
Policy Impact on Tax Justice
The tax amnesty program also raises the issue of fairness. On the one hand, the government plans to raise the Value Added Tax (VAT) rate to 12 percent by 2025, which will have a direct impact on the lower-middle class. On the other hand, the government provides opportunities for conglomerates to write off past tax liabilities at a much smaller cost than the normal rate.
It is feared that this policy will lead to public distrust of the government’s consistency. The lower-middle class, which is already pressured by the VAT increase, may feel unfair that the super-rich are getting tax amnesty.
Program Effectiveness Is Still Doubtful
Although it aims to improve tax compliance, the effectiveness of tax amnesty is still a big question mark. In the first program, tax revenue from declaration was far