Indonesia misses out on $27b in tax revenue

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Indonesia-taxIndonesia is missing out on more than $27 billion in tax receipts annually because the tax office does not have enough personnel to keep up with the growing number of retailers and small and medium businesses.

The country is also likely to miss its target of $82 billion in tax collection this year as coal, manufacturing, mining and palm oil production — which are typically the biggest contributors to tax revenue — report declining profit or even losses in line with slowing demand and declining commodity prices in the global market.

The tax office has more than 31,316 officers to watch over 24.8 million registered taxpayers. That means a tax officer in Indonesia needs to serve 7,700 people, which is the highest ratio compared to those in OECD member countries. In Germany, the ratio is 1:727; in Australia 1:1,000; and in Japan 1:1,818.

In 2012, the tax office has improved its internal procedures and information technology, which resulted in a higher tax-to-cost ratio and rising tax officer productivity. The country’s tax collection compared to its GDP is now at 15 per cent, which is lower than the 20 per cent average among OECD countries.

The tax office is hiring 2,500 new officers next year, far short that what it needed. All government recruitment is being handled by the State Administrative Reform Ministry, which has only allocated 6,000 new positions for all ministries in 2014.

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Reading Time: 1 minute

Indonesia is missing out on more than $27 billion in tax receipts annually because the tax office does not have enough personnel to keep up with the growing number of retailers and small and medium businesses.

Reading Time: 1 minute

Indonesia-taxIndonesia is missing out on more than $27 billion in tax receipts annually because the tax office does not have enough personnel to keep up with the growing number of retailers and small and medium businesses.

The country is also likely to miss its target of $82 billion in tax collection this year as coal, manufacturing, mining and palm oil production — which are typically the biggest contributors to tax revenue — report declining profit or even losses in line with slowing demand and declining commodity prices in the global market.

The tax office has more than 31,316 officers to watch over 24.8 million registered taxpayers. That means a tax officer in Indonesia needs to serve 7,700 people, which is the highest ratio compared to those in OECD member countries. In Germany, the ratio is 1:727; in Australia 1:1,000; and in Japan 1:1,818.

In 2012, the tax office has improved its internal procedures and information technology, which resulted in a higher tax-to-cost ratio and rising tax officer productivity. The country’s tax collection compared to its GDP is now at 15 per cent, which is lower than the 20 per cent average among OECD countries.

The tax office is hiring 2,500 new officers next year, far short that what it needed. All government recruitment is being handled by the State Administrative Reform Ministry, which has only allocated 6,000 new positions for all ministries in 2014.

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