19 Jun 2017
Every Breath You Taxed
“Every Breath You Take” is a song by English rock band ‘The Police’ from their 1983 album ‘Synchronicity’. The composer, Sting, gave me his signature on his picture in the beginning of 90’s when he had a show in Senayan. He is a rocker that has a healthy lifestyle, no smoking, no drugs. He is also a vegetarian that like meditation.
The first part of the above song lyric can be reflected the taxation situation in this current period. Lately, there are a lot of new policies and rulings to watch tax payers closely that have been regulated by MOF & DGT, such as:
a. Account balance Rp 1 billion and above should be reported to DGT. There are around 496 thousand accounts with the above threshold amount. It is related with 291.331 tax payers or 37,69% of total tax payers that have filed the return. Not many actually!!
b. On June 7th, 2017, Indonesia has signed Multilateral Instrument on Tax Treaty (MLI) at OECD Head Quarter in Paris, France. There are 68 countries have agreed to modify the contents of tax treaties without bilateral negotiation process. Another 30 countries will follow to agree with.
Every step that the tax payers will do in the future will be watched by DGT to avoid Base Erosion and Profit Shifting action.
In relation with the above, I comment as follow:
- The knowledge of International Taxation of the tax officers and tax payers / tax consultants should be enhanced.
Tax treaties are based on substance of actual happened, it is typical of common law regulations. Indonesia follows civil laws, where every regulation should be in writing. Government has to adapt the local tax laws and rulings with the new concepts of tax treaties. Basically tax treaties cannot extend or add the tax objects in the local tax laws. Taxpayers that having international transactions need to enhance their international taxes in order to comply with the updated tax treaties, i.e. tax treaties after MLI were signed. They can hire a tax consultant that having International taxation experienced. Also tax officers need to understand more deeply, since the way to interpret the update treaties is different. It is more tend to common law understanding.
- Tax consultants should be more independent.
It is time for tax consultants to have their own law. It is for balancing the fairness in the taxation areas. Tax consultants need the umbrella that not under DGT/MOF anymore. It is like the other professions such as Auditors, Advocates that have their own laws. Law for tax consultants is related for improving the involvement in the taxation area for building this country. Contributions and rule of the games can be clearly mentioned in this law, so their can do their job more professionally.
- For all tax payers, since DGT can monitor bank accounts and has started to audit with Preliminary Evidence (Bukti Permulaan), in some areas they have to disclose and report their revenue, profit and assets properly.
Reporting properly and complied is a must now if the tax payer would adapt with this current transparency era.
If the three parties: DGT, Tax Consultants and tax payers can work professionally, I believe together we can contribute tax collections significantly but in the fairness ways.
Agung Tjahjady SH, CPA, MM, BKP
Registered Tax Consultant, Advocate
0816 825 348
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