ELIZABETH SOELISTIO WRITES – Whether it’s Indonesians living outside the country or foreigners in it, everyone’s supposed to follow the laws where they live.

Seems simple, but things got confusing recently when the government said residents of Indonesia and its citizens abroad must both pay Indonesian taxes.

In July, Parliament approved a tax amnesty that, as reported by the Jakarta Globe, provides a free pass for people to declare past, undeclared income without prosecution.

To participate, taxpayers must register with the government and submit paperwork to their local tax office before paying a fine (rates based on the time they register) and owed taxes.

The government greenlighted the program to boost domestic revenue during an ongoing slump in coal and gold prices. It’s also a strategy for Indonesia to get more taxpayers on the books, potentially increasing future cash flow.

But the obscure nature of the new program resulted in both foreigners and Indonesians asking if they are required to participate in the program and if there are any consequences they would receive if they choose to opt out.

According Indonesia’s current income tax laws, foreigners who earn income in Indonesia are required to be domestic taxpayers and have a taxpayer identification number (NPWP) regardless of their length of stay. Indonesians who earn incomes outside of Indonesia are not required to pay domestic tax, have a taxpayer identification number, and participate in tax amnesty if they are already taxed by the country where they work.

Although there are no consequences for not participating in Indonesia’s tax amnesty, those who do not participate are subject to examination, paying for the owed taxes, and can even be issued a jail sentence according to the law.

Tax amnesty is not an obligation for everyone to follow. However, there is a high cost for not participating and these consequences make tax amnesty seem like a law rather than an option. When it is quite obvious that the Indonesian government is in favor of their tax amnesty program and the cons of choosing to opt-out heavily outweigh the pros, why make it an illusion of choice?

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.