Do you remember the big tax scandal by Asian Agri in Indonesia? The scandal caused a state loss of approximately 1.25 trillion rupiahs with a fine of 2.5 trillion rupiahs. Asian Agri case was revealed after the justice collaborator or whistleblower was his former employee. The amount of income loss of the country is fantastic especially if Asian Agri is not the only taxpayers who do tax evasion. We turn to the topic of tax amnesty. The number of declarations of property made by the Taxpayer amounted to approximately 4.813 trillion rupiahs. The fantastic amount may consist of declarations of property related to tax evasion. We move on to the Panama papers international scandal. The scandal exposes state leaders, officials, politicians, businessmen, who employ the services of Mossack Fonseca law firm in Panama for business purposes, proprietary disguises, tax evasion, and even tax evasion. Based on these three topics, we can conclude that tax evasion is still a great public relation for the government, even for all Indonesians. One of the instruments to overcome the problem, in my opinion, is how taxation policy is able to muzzle tax evasion. If I have the authority to change taxation policy in Indonesia, which of the most important factors should be changed in order to reduce tax evasion in Indonesia?
For taxation, bank secrecy is more dangerous than a tax haven country. Tax haven country is indeed a haven for taxpayers in hiding wealth and business units. The existence of tax haven country is detrimental to the country taxpayer domicile because of the potential tax lost due to tax evasion and tax evasion. However, bank secrecy is much more disadvantageous because of the limited access of the Directorate General of Taxation (DGT) to know the potential for tax evasion. The solution, the Directorate General of Taxes is granted the authority to access banking data and financial transactions. That way, DGT can perform optimal supervision and can reveal the massive and systematic embezzlement through the analysis of financial transactions. Currently, the government has begun to implement regulations on the obligation to report assets in the form of taxpayers' assets in banks and financial institutions at certain balance limits. In the future, the information disclosure policy of banking and financial transactions for DGT can be a solution to detect the existence of tax evasion indication and to optimize the supervision of the taxpayer.
Power tends to corrupt, and absolute power corrupts absolutely. Along with such an enormous authority when the disclosure of banking information access and financial transaction analysis is applied in the DGT, then the excess that can occur is the abuse of authority by unscrupulous employees. Therefore, the subsequent solution strengthens the internal DGT. The internal control system must run optimally to prevent abuse of authority by irresponsible persons. The internal control system is related to the addition of authority, such as legislation, tighter authorization, fairer reward and punishment, strengthening employees integrity, and adequate supervision. That way, such great authority can't be misused by unscrupulous employees.
Tax evasion is certainly closely related to tax compliance. Tax compliance is a classic problem that happened in the past until now. The problem of tax compliance is as old as taxes themselves [1]. According to Andreoni, tax compliance issues can be seen from public finance, law enforcement, organizational structure, employees, code of conduct, or a combination of all these aspects. Allingham and Sandmo theoretically through his research argued that if the taxpayer revealed and proven to embezzle, then carried out investigated all tax obligations for several years back, then the taxpayer will become obedient taxpayer [2]. The case of Asian Agri and Panama Papers was revealed after the whistleblower. That is, tax authorities are difficult to know and reveal the existence of tax evasion scandal. Improved tax rates, tax penalties, and increased tax audit budgets such as Allingham and Sandmo's opinion do not dampen Taxpayers' intentions for tax evasion. Law enforcement is the most important factor in muzzling tax evasion. Law enforcement here is not limited to enforcing the law, but revise the regulations so as to facilitate the government in combating tax evasion.
Tax evasion can be eradicated through the authority of access to banking information and financial transactions, internal strengthening of the organization at the Directorate General of Taxes, as well as law enforcement that creates a deterrent effect. Access banking information can maximize taxpayer supervision. The current tax oversight is like the "iceberg" phenomenon where the "biggest chunk" can't be touched by the DGT because of the lack of data and information bases. The authority to access data and banking information and financial transactions is expected to help overcome the phenomenon of "iceberg". Internal strengthening is expected to make DGT more solid and integrity despite the addition of authority. Taxpayer compliance is very sensitive when there are unscrupulous tax employees. Although done by one person, but the impact is remarkable for the trust of DGT and taxpayer compliance. Law enforcement that creates a deterrent effect is expected to lead to rethinking taxpayers to commit tax evasion. Ultimately, taxpayer compliance may increase and tax revenue targets can be achieved.
[1] James Andreoni, Brian Erard dan Jonathan Feinstein, “Tax Compliance,” Journal of Economic Literature Vol. 36, No.2, (Juni, 1998), 818-860.
[2] James Alm., Gary H. McClelland, dan William D. Schulze, G. Allingham dan Agnar Sandmo, “Why Do People Pay Taxes?”, Journal of Public Economics, (1992), 21-38.
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