Indonesia delays purchase of new tax system software as revenue below target

Out of Indonesia's 260 million people, only about 40 million are registered taxpayers and a majority have little concept of the need to pay taxes.
Out of Indonesia's 260 million people, only about 40 million are registered taxpayers and a majority have little concept of the need to pay taxes.PHOTO: AFP

JAKARTA (REUTERS) - Indonesia's tax office will postpone until next year the purchase of new US$200 million (S$271 million) software to analyse compliance and boost revenues in South-east Asia's largest economy, the tax chief said on Tuesday (June 25).

The resource-rich country last year announced it would upgrade its outdated tax technology, following the success of its 2016-2017 tax amnesty programme, in a bid to better profile taxpayers and identify non-payers, but the planned tender has been delayed several times.

The latest delay comes at a time when the government faces slow growth in state income, which officials attribute to weaker-than-expected economic growth and low global commodity prices.

Robert Pakpahan, the head of the Finance Ministry's tax department, said the authorities are currently still looking for a procurement agent to help set up a tender next year.

"We would like the procurement to have no governance issues."

"If we complete (the tender) but governance issues pop up, that would be troublesome," Pakpahan told reporters, adding that he now expected the system to be fully operational by 2024.

Out of Indonesia's 260 million people, only about 40 million are registered taxpayers and a majority have little concept of the need to pay taxes.

The new technology is expected to spot non-compliance and avoidance significantly quicker than now, Pakpahan said.

 
 
 

It would also help the tax office analyse a trove of data coming in from a global initiative of financial information sharing between tax authorities in many countries, Pakpahan told Reuters in an interview last year. Indonesia began receiving such data in 2018.

Between January and May, tax revenue grew merely 2.4 per cent on-year to 496.7 trillion rupiah (S$48 billion), below a target of getting 19 per cent more revenue in 2019 compared to 2018, data from the Finance Ministry showed.

However, Pakpahan said the delay would not hurt 2019's revenue collection as the tax office is working on an upgrade of its internally developed system.

Yustinus Prastowo, executive director of the Centre for Indonesia Taxation Analysis, said there is a risk of up to a 170.3 trillion rupiah revenue shortfall this year, if the trend of weak tax takes persists.