This was to avoid the impression that the government was targeting those who have been relatively obedient and middle-to-low income earners.
Tax amnesty
Arief Kamaludin | Katadata

The government’s tax amnesty scheme is starting to make the public quite restless because all taxpayers are now required to report their total assets if they do not want to be hit with a huge fine when the scheme ends March next year.

However, if middle-to-low income taxpayers sign up to the scheme, they would have to pay the mandatory penalty (redemption fee).

This disquiet was apparent at a tax amnesty information event organised by the Directorate General of Tax for the Association of Managers of Indonesian Celebrities (Imarindo) and a number of celebrities a few days ago. Imarindo Chair Nanda Persada said celebrities have tax liabilities because they lack knowledge. Their liabilities range from IDR 1 million to IDR 1 billion.

Indonesian soap opera star Ben Kasyafani said he knows very little about taxes and intends to sign up to the tax amnesty scheme. Although he has been paying his taxes, he is concerned that he has made mistakes in filling out the tax forms. “Taxes are a bit different for celebrities. I am pleased with this information session because it means I can ask questions directly. False information often circulates because we don’t make the effort to find out about it,” Ben said.

(Read: Anang Hermansyah Offers to Participate in Tax Amnesty)

Without doubt, some taxpayers deliberately conceal their wealth, while others fail to report their assets in tax reports because they do not know enough about tax. These taxpayers are in danger of being hit with severe sanctions for being negligent. Additional wealth that has not been reported in tax forms will be treated as additional income and be taxed, even if it is not a taxable object.

As well as income taxes, these taxpayers must also a pay an additional wealth penalty of 2 percent for a maximum of 24 months, or 48 percent in total. Failure to report their assets could attract an even higher penalty of a fine of up to 200 percent, or a criminal penalty. This is set forth in Law No. 16/ 2009 concerning the general terms and procedures for taxation.

These taxpayers have no other option but to participate in the tax amnesty scheme to avoid these harsh penalties. Taxpayers who participate in the program would not have to pay any penalty for failing to pay taxes before 2015. (Read: What If Taxpayers Do Not Participate in the Tax Amnesty?)

However, participating in the tax amnesty program also has its own consequences. Taxpayers would have to pay a penalty ranging from 2 percent to 10 percent of their reported wealth, depending on which program they participate in and when they start participating.

The tax amnesty policy could actually be beneficial for taxpayers who fail to pay their taxes. Information gathered by Katadata shows many have complained over this matter.

Some feel they have been regularly paid their income taxes but have forgotten to include their assets in their tax reports. Once they sign up for the tax amnesty program, they will have to pay a huge redemption fee on their assets despite regularly paying all sorts of taxes, such as land and building taxes.

(Read: Participate in Tax Amnesty or Fix Your Tax Report?)

The Tax Amnesty Law says that additional wealth includes all types of assets, tangible and intangible, moveable and immoveable, business assets and other assets, such as cash, land, houses, vehicles, bonds, time deposits, mutual funds, stocks, and unit linked insurance.

Center for Taxation Analysis (CITA) Director Yustinus Prastowo said he had predicted that the public would be uneasy and object to this tax amnesty policy. “And that’s what’s happened, things must be clarified immediately,” he told Katadata.

(Read: Sri Mulyani’s FAQs on the Tax Amnesty)

During the deliberation of the tax amnesty bill, Yustinus proposed special treatment in certain cases, such a taxpayers who have not reported their assets or inheritance in their tax forms. This was to avoid the impression that the government was targeting those who have been relatively obedient and middle-to-low income earners. The government must take moderate steps, he said.