SUNSET POLICY, REIVENTING POLICY, AND TAX AMNESTY: A COMPARATIVE

STUDY OF INDONESIAN TAXATION POLICY

SOLIHIN MAKMUR ALAM

BINUS UNIVERSITY

ABSTRACT

Indonesia has implemented 3 (three) major tax policies, namely Sunset Policy, Reinventing
Policy, and Tax Amnesty Policy. Sunset Policy in 2008 and Reinventing Policy in 2015 showed
positive results in increasing the tax revenues for the year, yet failed to meet the target set for the
respective years. The latest tax amnesty program implemented for the year 2016 is expected to
generate more positive results as it offers taxpayers with more favorable opportunities. Although
at the end of the first quarter the results are not too impressive, the government of Indonesia
remains optimistic and hopeful of their policy will success at the end of the year.
Keywords: Sunset Policy, Reinventing Policy, Tax Amnesty

1. INTRODUCTION

Tax revenues are critical to sustainable development because they provide governments with
independent revenue for investing in development, reducing poverty and delivering public
services as well as increasing state capacity, accountability and responsiveness to their citizens.
One of the measurements of tax is the tax-to-GDP (tax ratio) ratio. It is an economic
measurement that compares the amount of taxes collected by a government to the amount of
income that country receives for its products. Ideally, higher GDP means the government should
receive higher taxes (Paepe & Dickinson, 2014). Compared to developed countries, developing
countries always struggle to maintain a high tax-to-GDP ratio. While developed countries collect
an average of 34% of their GDP as tax, developing countries only achieve half of this (Paepe &
Dickinson, 2014). In fact in Asia Pacific region the tax ratio is around 15% to 20%. Indonesia
has never reached that level in the past decade.

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Once a government constantly fail to collect considerable amount of tax revenue compared to
how much wealth that economy holds or generates, governments resort to many different actions
in order to improve the situation. One of the most famous actions taken by governments are in
the form of Tax amnesties. What is Tax amnesty? It is an exemption of tax sanctions or charges
which can cover both the principal and the interest or fine. This exemption can be applied to
administrative sanctions (interest or fine) or criminal punishment (imprisonment or fine of 200-
400 percent) according to law (Gunadi, 2016).

Like many other governments, several actions have been proposed and worked out in the past to
boost the tax revenue & meet the targets set by the Indonesian government. It implemented two
tax amnesty programs during the years 1964 and 1984. Due to the low participation both
programs were considered unsuccessful. Some of the highlighting actions recently taken by the
government are to implement major 3 key tax amnesty policies, namely; Sunset policy in 2008,
Reinventing policy in 2015 and the latest which is undergoing its implementation in 2016 the tax
amnesty policy (Diela, 2016). In this paper we will explain in details each of these policies and
its outcome or expected outcome.

2. LITERATURE REVIEW

a. Sunset Policy

What is sunset policy?

Sunset policy is write-off of administrative sanctions for the following taxpayers who voluntarily
submit or amend their previously submitted tax returns. These include; (1) Unregistered
taxpayers, (2) Registered taxpayers that fail to submit their tax returns, & (3) Tax payers that
previously submitted false tax returns (kemenkeu.go.id, 2015). These incentives are only given
on tax related to income.

The government of Indonesia implemented Sunset policy with the objective of increasing the tax
revenue by encouraging the current registered taxpayers as well as in the hope of increasing the
taxpayers’ base. The policy was brought into effect through Article 37A of Act No.28 of 2007
which was further supported through the Minister of finance regulation number 18/PMK.03/2008

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(pajak.go.id, 2015). It was initially intended to run from 1st July until 31st December 2008, but
later the date was extended until 28th February 2009 (pajak.go.id, 2015).

As for Article 37A of Act No. 28 of 2007 can be seen in Table below.

Undang-Undang Nomor 28 Tahun 2007 Pasal 37A :

Ayat 1
Wajib Pajak yang menyampaikan pembetulan
Surat Pemberitahuan Tahunan Pajak
Penghasilan sebelum Tahun Pajak 2007, yang
mengakibatkan pajak yang masih harus
dibayar menjadi lebih besar dan dilakukan
paling lama dalam jangka waktu 1 (satu)
tahun setelah berlakunya Undang-Undang ini,
dapat diberikan pengurangan atau
penghapusan sanksi administrasi berupa
bunga atas keterlambatan pelunasan
kekurangan pembayaran pajak yang
ketentuannya diatur dengan atau berdasarkan
Peraturan Menteri Keuangan
Source: (Dirjen Pajak, 2007)
Ayat 2
Wajib Pajak orang pribadi yang secara
sukarela mendaftarkan diri untuk memperoleh
Nomor Pokok Wajib Pajak paling lama 1
(satu) tahun setelah berlakunya Undang-
Undang ini diberikan penghapusan sanksi
administrasi atas pajak yang tidak atau kurang
dibayar untuk Tahun Pajak sebelum diperoleh
Nomor Pokok Wajib Pajak dan tidak
dilakukan pemeriksaan pajak, kecuali terdapat
data atau keterangan yang menyatakan bahwa
Surat Pemberitahuan yang disampaikan Wajib
Pajak tidak benar atau menyatakan lebih
bayar.

To take advantage of the Sunset Policy program, taxpayers must meet some requirements as
outlined in Table below

Persyaratan Pemanfaatan Sunset Policy

Wajib pajak baru
a) secara sukarela mendaftarkan diri untuk
memperoleh NPWP dalam tahun 2008-April
2009;
Wajib pajak lama
a) telah memiliki NPWP sebelum tanggal 1
Januari 2008;
b) terhadap SPT Tahunan PPh yg dibetulkan

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b) tidak sedang dilakukan Pemeriksaan Bukti
Permulaan, penyidikan, penuntutan, atau
pemeriksaan di pengadilan atas tindak pidana
di bidang perpajakan;
c) menyampaikan SPT Tahunan Tahun Pajak
2007 & sebelumnya terhitung sejak
memenuhi persyaratan subjektif & objektif
paling lambat tanggal 31 Maret 2009; dan
d) melunasi seluruh pajak yang kurang
dibayar yang timbul sebagai akibat dari
penyampaian SPT Tahunan PPh, sebelum
SPT tersebut disampaika
belum diterbitkan SKP;
c) terhadap SPT Tahunan PPh yg dibetulkan
belum dilakukan pemeriksaan atau dalam hal
sedang dilakukan pemeriksaan, Pemeriksa
Pajak belum menyampaikan SPHP;
d) telah dilakukan Pemeriksaan Bukti
Permulaan, tetapi Pemeriksaan Bukti
Permulaan tersebut tidak dilanjutkan dengan
tindakan penyidikan karena tidak ditemukan
adanya Bukti Permulaan tentang tindak
pidana di bidang perpajakan;
e) tidak sedang dilakukan Pemeriksaan Bukti
Permulaan, penyidikan, penuntutan, atau
pemeriksaan di pengadilan atas tindak pidana
di bidang perpajakan;
f) menyampaikan SPT Tahunan Tahun Pajak
2006 & sebelumnya paling lambat tanggal 31
Desember 2008; dan
g) melunasi seluruh pajak yang kurang
dibayar yang timbul sebagai akibat dari
penyampaian SPT Tahunan PPh, sebelum
SPT Tahunan PPh tsb disampaikan.
h) PPh sebagaimana dimaksud pada huruf b
dan huruf c adalah PPh yang dibayar sendiri
dan dilaporkan dalam SPT Tahunan PPh.
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Source: (Dirjen Pajak, 2007)

Based on the descriptions above , it can be concluded that the removal of sanctions
administration in the Sunset Policy program are ( 1 ) elimination of administrative sanctions to
taxpayers who do not have a NPWP , ( 2 ) submission and correction of wrong SPT , and ( 3 )
elimination of administrative penalties for underpayment of taxes. Sunset Policy program gives
people an opportunity to start taxation liabilities properly through rectification Annual Income
Tax Return. Sunset Policy apply for a limited period and are part of the program remission of tax
applied in the Indonesian tax.

According Devano and Rahayu (2006), remission of taxes (tax amnesty) is Government policy in
the field of taxation which provides for tax supposedly owed to pay ransom in a certain amount
which aims to provide additional tax revenues and the opportunity for taxpayers who do not
comply into tax compliance before.

James Alm (1998) states that the tax amnesty should have some important specification that is,
(1) specification of the amount of unpaid taxes, interest, and penalty fees more to the tax will be
forgiven, (2) specification taxpayers qualify for forgiveness, and (3) specification of the type of
tax involved in the tax amnesty. Based on the contents and terms of utilization previously
described, it can be concluded specifications of the Sunset Policy program.

The specifications of the Sunset Policy summarized in table

TYPE OF SPECIFICATIONS RESULT OF SPECIFICATIONS
The tax amount is forgiven Amounting to administrative sanctions
(interest) on the principal
unpaid tax

Taxpayers who can be forgiven Old and new tax payer

Taxes type (granted amnesty) Income tax

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Sunset Policy program gives flexibility to the taxpayer. this flexibility will be followed by the
application of tax penalties. Taxpayers who have not meet tax obligations correctly before the
program implementation Sunset Policy is required to take advantage of the program in order to
avoid sanctions taxation, since Act No. 28 of 2007 authorizes Article 35A The tax authorities to
access data and information related to taxation. Tax penalties prescribed by several articles in
Law No. 28 Year 2007. Sanctions can be imposed tax to taxpayers who do not meet tax
obligations are correctly through Sunset Policy program outlined in Table.

Sanksi Perpajakan terkait Program Sunset Policy

Bentuk pelanggaran
Tidak mendaftarkan diri untuk memperoleh
NPWP (tidak memiliki NPWP).
Penyampaian SPT melewati jangka waktu
yang ditentukan.
Sudah menyampaikan SPT tepat waktu,
namun ada kesalahan, dan membetulkan
sendiri SPT Tahunan yang mengakibatkan
utang pajak menjadi lebih besar.
Salah mengisi SPT, namun dengan
Sanksi
(Pasal 39)
• Sanksi Administrasi Denda paling sedikit
2 kali jumlah pajak terutang yang tidak atau
kurang dibayar dan paling banyak 4 kali
jumlah pajak terutang yang tidak atau
kurang dibayar
• Sanksi pidana Pidana penjara paling
singkat 6 bulan dan paling lama 6 tahun
(Pasal 7)
• Sanksi administrasi Denda sebesar Rp
1.000.000 untuk SPT Tahunan Pajak
Penghasilan Wajib Pajak Badan
• Denda sebesar Rp 100.000 untuk SPT
Tahunan Pajak Penghasilan Wajib Pajak
Orang Pribadi
(Pasal 8)
• Bunga 2% per bulan atas jumlah pajak
yang kurang dibayar dihitung sejak saat
penyampaian Surat Pemberitahuan berakhir
sampai dengan tanggal pembayaran
(Pasal 8)

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kesadaran sendiri mengungkapkan
ketidakbenaran pengisian SPT (Sudah
dilakukan pemeriksaan namun belum
diterbitkan Surat Ketetapan Pajak)
Melakukan suatu ketidakbenaran pajak,
namun dengan kesadaran sendiri
mengungkapan ketidakbenaran tersebut dan
melunasi kurang bayar pajak (Sudah
dilakukan pemeriksaan tetapi belum
dilakukan penyidikan)
Kurang bayar pajak (Pembayaran dilakukan
setelah tanggal jatuh tempo penyampaian
SPT Tahunan)
Source: (www.pajak.go.id)
• Kenaikan sebesar 50% dari pajak yang
kurang dibayar
(Pasal 8)
• Denda sebesar 150% dari jumlah pajak
yang kurang dibayar
(Pasal 9)
• Bunga sebesar 2% per bulan dihitung
mulai dari berakhirnya batas waktu
penyampaian SPT Tahunan PPh sampai
dengan pembayaran dilakukan

After the tax amnesty ends, the government will conduct enforcement ntensive tax law
enforcement. As part of the law enforcement taxes, sanctions outlined in the table will be strictly
implemented. Based on the overall description of the above it can be concluded that the Sunset
Policy has two important substances, namely the elimination of administrative sanctions in the
future the enactment program and affirmation sanctions after the expiration of the tax program.
Both of these substances are expected to encourage the willingness to pay taxes.

The Impact of the Sunset Policy (Factors) Willingness to Pay Taxes

Sunset Policy influence on the willingness to pay taxes can be developed to see the effect of each
substance Sunset Policy against several indicators willingness to pay taxes. Substance Sunset
Policy The first is the removal of sanctions administration for taxpayers who do not have a
NPWP Tax penalties due to not acquiring the NPWP is an obstacle to the taxpayer who actually
has the desire to pay taxes. Sunset Policy program that frees sanctions for NPWP lack of
ownership this sunset policy is expected to encourage the willingness to paytax by the taxpayer.

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The second Substance of Sunset Policy is submission and correction of wrong SPT. The taxpayer
is given an opportunity to correct and submit her tax return. Based on the self-assessment
system, taxpayers are given the confidence to count, fix and submit their own tax return. Use of
this system can reduce negative assessment of the taxpayer on the effectiveness of the tax
system. reduced ratings negative will eventually encourage the willingness of taxpayers to pay
taxes.

The third substance Sunset Policy is the elimination of administrative sanctions on underpayment
of taxes. Elimination of administrative sanctions will reduce the tax burden must be borne by the
taxpayer.

Sunset Policy fourth substance is tax law enforcement, after a period of remission of taxes. of
the tax law enforcement consisting inspection, investigation and tax collection.

Related research conducted by the tax amnesty Alm and Beck (1993) as quoted in Bintoro
research (2007) which shows that the tax amnesty always affect tax compliance (tax compliance)
by the taxpayer where a will paying taxes included. In practice, the application of the amnesty
program taxes in some countries also shows the success and proves that the program can increase
the willingness to pay the tax by the taxpayer.

Sunset policy was considered a successful program based on the results it delivered in terms of
tax revenue amount. The government had planned IDR 534.53 trillion as the target amount for
2008. With the implementation of Sunset policy, government of Indonesia was able to collect
IDR 571.1 trillion, which is a surplus of IDR 36.57 trillion than the target amount (ortax.org,
2015).

b. Reinventing Policy

Due to the shortfall of tax revenue target of IDR 1,072.4 trillion in 2014 by 8.5% and reaching
only up to 41.04% of the Rp1, 294.2 trillion target set for 2015 by the end of first half of the
year, government of Indonesia was forced take up measures to ensure similar failure will not be

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repeated in the year 2015 (Provis Consulting, 2015). Approved by the president, one of the main
strategies chosen to achieve this goal was introduction of “Reinventing Policy” or as some call it
“Sunset Policy II” (Pemeriksaanpajak.com, 2015). Under this policy the taxpayers are offered an
opportunity to voluntarily submit their tax returns or amend their previously submitted tax
returns related to declared income and assets and/or liabilities (Kristanto, 2015). Through
minister of finance regulation (PMK) number 91/PMK/03/2015 which was published on 7th may
2015, the director general of taxation (DGT) was given the authority to reduce or remove the tax
administration sanctions of those taxpayers who participate in the policy
(Pemeriksaanpajak.com, 2015).

According to the MOF regulation there are several taxpayers who may be granted the facility of
a reduction or write-off of the administration sanction. These include, (1) unregistered taxpayers,
(2) registered taxpayers that fail to submit their tax returns, & (3) taxpayers that submitted false
tax returns (Kristanto, 2015). Administrative sanctions which are reduced or written-off shall
include all sanctions resulting from the revision, late payment or submission of corporate and/or
individual income tax returns for tax year 2014 and the previous years and/or monthly income
tax returns and VAT returns for December 2014 and previous that are done in 2015.

For the Reinventing Policy to succeed, following actions were required to carry out by the DGT
(Kristanto, 2015).
 Prioritizing special tax audits in 2015 on:
 Individual taxpayers who perform independent personal services; and
 Corporate taxpayers who have been urged to take advantage of the Reinventing policy,
but do not use it.
 Issuing new instructions of a special tax audit for taxpayers who do not take advantage of
the Reinventing policy even though they may have received an Advice letter based on the
manual analysis of information, Data, Report and Complaint (IDLP)
 Cancelling instruction/assignment/approval of a tax audit for taxpayers who have
responded to the advice letter or have taken advantage of the Reinventing policy.

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  Continuing the instruction/assignment/approval of a tax audit for tax payers who have not
responded to the Tax office’s summons or have not taken advantage of the Reinventing
policy.
 Every taxpayer who responded to the summons were requested to sign the Minutes of
Summons, which states that the minutes of summons is prepared under no duress or
intimidation pursuant to the Advice Letter give.

While we keep mentioning about the administrative sanctions that will be waived, it is important
to know the details of these administrative sanctions related to tax returns to fully understand the
capability of such a policy to generate much needed tax revenue for the government. The
administrative sanctions which are pardoned under the Reinventing policy are;
 Write-off of interest due to a revision of the tax return (2% per month) and fine because the
tax invoice for the VAT return is not issued (2% x tax base); and
 Write-off of the fine due to late submission of the tax return (IDR 1 million for a corporate
income tax return; IDR 100,000 for an individual income tax return and monthly income tax
return; IDR 500,000 for a monthly VAT return) and interest due to late tax payment (2% per
month) (Kristanto, 2015).

As in every other policy, there are both benefits and costs involved in implementing a policy
such as Reinventing policy. By offering to reduce or write-off of administrative sanctions
government will be able to generate a windfall tax revenue gain which could be the result of
successful collections from both underground domestic economy and capital held abroad
(Uchitelle, 1989). Other benefits include the possibility of increasing the tax base which would
improve the future tax collections. Also if a government is looking to strengthen their tax
enforcement regime, such a policy could ease the transition by encouraging the tax payers to
come forward without fear with their tax filings before the new regime is introduced (Uchitelle,
1989).

The possible negatives that could arise from implementing such policies are equally crucial to
government as its benefits. Implementing such policies frequently could lead to interpretation of
government’s inability to enforce law, decrease in taxpayers who report routinely and also could

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enable the government to ignore the structural issues in the economy due to windfall tax revenue
gains through the policy (Uchitelle, 1989).

The administrative sanctions resulting from and audit process, such as a Tax Assessment Letter,
Tax Underpayment Assessment Letter, and the like will not be reduced or written-off under the
Reinventing policy. The regulation came into effect from May 4th 2015 (Kristanto, 2015).

However, even with the positive development in the amount of tax revenue collected at the end
of 2015, it was still behind the target amount. The government of Indonesia was able to collect
IDR 1,069 trillion as tax revenue which is only 82% of the targeted amount, hence concluding
that the Reinventing policy was not too successful in delivering the expected results (Indonesia-
investment.com, 2016)

c. Tax Amnesty

Definition
Tax amnesty is a limited-time opportunity for a specified group of taxpayers to pay a defined
amount, in exchange for forgiveness of a tax liability (including interest and penalties) relating to
a previous tax period or periods and without fear of criminal prosecution. It typically expires
when some authority begins a tax investigation of the past-due tax. In some cases, legislation
extending amnesty also imposes harsher penalties on those who are eligible for amnesty but do
not take it (Diela, 2016).

Types
Tax amnesties an be address to all taxpayers orr to categories of taxpayers (e.g small and
medium sized companies), to registered or non registered taxpaye ; they can cover all taxes or
certain types of taxes (income tax, wealth tax, etc). They may also cover sosial security
contributions. They may encompass national and federal taxes, state and provincial taxes and
even country and municipal taxes.

The scope of the forgiveness can be broad, including any of the following advantaages :
(a) Partial or total reduction in the amount of the principal;

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 (b) Partial or total reduction in the amount of interest and penalties;
(c) Waiver of criminal tax law prosecution;
(d) Instalment programs that may provide for a significant reduction in the net present value
of the amount owed.

Tax Amnesty in Indonesia

Through Forgiveness Tax bill, the government intends to achieve two aims at once. First,
broaden the tax base to increase tax revenues in 2016. Second, utilizing the funds of thousands of
trillions belongs to the people of Indonesia abroad to contribute to the financing of development,
particularly infrastructure that it requires huge capital.

Therefore, in the draft of the bill, there are two strategies used, namely by applying a ransom for
forgiveness tax rates and introduced the concept of repatriation of funds from abroad.

Associated with the redemption rate of tax forgiveness, Forgiveness Tax bill provides incentives
for those who apply the fastest. To request for the first three months since the law was passed,
only charged 2% of the net assets value increment tax amnesty being applied to the value of net
assets in the annual tax return in 2014 that became the basis of deduction.

To request for the second three months since the law was passed, would be subject to 4% of the
difference between the value of net assets being applied tax amnesty with the value of net assets
in the tax return in 2014 that became the basis of deduction. As for the request for the second
half since the law was passed, would be subject to 6% of the difference between the value of net
assets being applied for tax amnesty.

As for the repatriation of funds from abroad, the Tax Forgiveness bill provides incentives for
those who apply the fastest. To request for the first three months since the law was passed, the
redemption rate is only charged at 1%. To request for the second three months since the law was
passed, the redemption rate to 2%. As for the request for the second half since the law was
passed, the redemption rate increased to 3%. In the hundreds of trillions of rupiah, the difference
is certainly very significant percentage of its nominal value.

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Especially for the repatriation of overseas funds this, the bill directs the Tax Forgiveness for the
purchase of Government Securities for 1 year. After that, a taxpayer may use a variety of other
investment instruments, such as investment in infrastructure, property as well as other retail
businesses.

A tax amnesty is an exemption of tax sanctions or charges and can cover both the principal and
the interest or fine. The effectivity of the tax amnesty program can be measured by the creation
of additional tax receipts of between Rp 60 trillion and Rp 100 trillion (Kontan, 29/2/2016). This
exemption can be applied to administrative sanctions (interest or fine) or criminal punishment
(imprisonment or fine of 200-400 percent).

The exemption from sanctions can be thorough or partial (only the criminal or administrative
part). People can also be partially exempted from administrative sanctions. In 2015, the
government twice issued exemptions from administrative tax sanctions:

First, the exemption from charging interest through Finance Ministry regulation
PMK-29/PMK.03/2015 dated February 13, 2015. With the full payment of tax debt, it is hoped
that there will be no further tax arrears. Second, the reduction or erasure of administrative
sanctions for any delay in submitting tax return forms (SPT), SPT corrections and delays in
paying taxes through Finance Ministry regulation PMK-91/PMK.03/2015 dated April 30, 2015.
These two policies were forms of a limited tax amnesty.

The policy of not charging interest aimed to encourage taxpayers to pay their tax debts and help
increase state revenue. Meanwhile, the reduction or erasure of administrative sanctions for SPT
delay and corrections aimed to encourage taxpayers to submit their SPT, pay their tax debts in
full, correct any mistakes in the SPT and increase tax receipt as well as establish a strong tax
base.

In 2008, in line with Article 37A of Law No. 28/2007 on General Taxation Regulation, a sunset
policy or tax amnesty for SPT correction sanctions took effect. As the program was deemed
successful in creating additional tax receipts of Rp 7.5 trillion (US$564.76 million), it was
extended to February 2009.

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Unlike the sunset policy, the effectivity of which has been established, we have yet to hear any
news from the government on the effectiveness of the regulations PMK-29/2015 and PMK-
91/2015, comprising
(i) the full repayment of tax debt and reduced tax arrears;
(ii) increasing revenue
(iii) the encouragement for taxpayers to submit tax return forms
(iv) the payment of any tax shortfalls in the SPT
(v) corrections of 2015 SPT
(vi) the strengthening of the tax base (ortax.org, 2016).

Six Goals
In fact, prior to initiating any further tax amnesty (exemption of principal and all tax sanctions),
an evaluation of the two policies is necessary to assess whether a tax amnesty program is
effective or will boomerang (and harm the national taxation system). The evaluation of the
program's effectiveness must prove that the policies are successful in
(i) increasing tax receipts in 2015
(ii) reducing the amount of arrears significantly
(iii) resulting in more SPT forms being submitted in 2016
(iv) achieving the payment of all arrears and shortfalls in SPT
(v) leading to SPT corrections, resulting in decreasing investigation
(vi) strengthening the tax base to avoid tax evasion as early as possible and maximize tax
compliance (Gunadi, 2016).

If these six goals are not achieved, it means there are problems to which solutions must be found
that can improve the tax amnesty program to ensure greater tax receipts and increased
effectiveness. Therefore, a positive response to Andreas' wise suggestion is a must to improve
our keenness and caution in initiating tax amnesties and revising taxation laws, including the
General Taxation Law, the Income Tax Law, and the Value Added Tax Law (Gunadi, 2016).

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These laws were initiated by a number of experts, academics and professional taxation reformers
at the Harvard Institute for International Development. All articles in the law are conceptually
designed through the White Paper Policy filled with alternatives, analysis and evaluations.

Based on the analysis and evaluation, the government chose the option most suitable for
Indonesia's situation, conditions and culture to increase tax revenue. Have all the existing
regulations in the taxation laws been applied and administered? Without caution and accurate
calculation, the revision of all taxation laws can be counterproductive for tax revenues in the
nationaltaxation system.

Apart from the goodwill in granting reduced punishment for past tax evasions in exchange for
future compliance, a tax amnesty can be viewed as a statement of our lack of capacity in
enforcing tax laws. (Matthijs Alink and Victor van Kommer, 2011, Handbook on Tax
Administration). Causes for a tax amnesty can be a large amount of arrears, a widespread lack of
tax compliance or the intention of a fundamental reform of the tax system. Therefore, it is
understandable that some people point out that a tax amnesty can result in moral hazard.

Those lacking compliance are hoping for it, and those who complied may stop doing so when
they see the lack of fairness. The partial tax amnesty program might be unsuccessful, as it
requires a strong taxation base, such as an IT-based tax administration (Gunadi, 2016).

Absence of Subject and Object Data

Due to the absence of targeted subject and object data, the tax amnesty program is voluntary
rather than being based on targeted objects. The lack of monitoring, let alone enforcement
through a taxpayer database, reduces the effectiveness of the tax amnesty program.
(i) comprehensive third-party data reporting;
(ii) taxpayer identifiers with high integrity
(iii) a compatible legal framework
(iv) maximum automation of class data supplier
(v) large-scale data processing
(vi) an automated taxation process with minimized interaction to taxpayers. It should be
an honor for the new Taxation Director General to establish the foundation of a

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 proper IT-based tax administration to increase tax compliance through data-matching
and data analysis (Gunadi, 2016).

3. DISCUSSION

Tax Amnesty Programs – Around the Globe

a. United States

In 2009, a federal U.S. tax amnesty was granted to more than 14,700 American taxpayers.Many
U.S. states have had tax amnesties. The City of Los Angeles collected $18.6 million in its 2009
tax amnesty program, claiming that the amount was $8.6 million more than was expected and
that businesses saved $6.7 million in penalties.The state of Louisiana brought in $450 million
from its 2009 tax amnesty program, three times more than what was expected, according to
Republican Governor Bobby Jindal.

In a 2007 United States Senate bill that did not become law, a tax amnesty for illegal immigrants
was proposed. The tax amnesty was supported by then-president George W. Bush and his
Homeland Security Secretary Michael Chertoff.On June 26, 2012, IRS Commissioner Doug
Shulman said the IRS offshore voluntary disclosure programs has so far collected more than $5
billion in back taxes, interest and penalties from 33,000 voluntary disclosures made under the
first two programs under normal circumstances, evading tax or overstating one’s expenses and
deductions can result in severe penalties. With tax amnesty programs, governments offer limited
time to tax payers to pay back taxes and to file late tax returns. Tax payers are however, also
required to file their returns with the IRS.

Such programs are designed to encourage tax payers to file their tax returns and to pay overdue
taxes. What people get in return is reduced penalties as an incentive to come forward and pay
taxes – in some instances, the penalties can even be waived off completely. Tax amnesty
programs like the Offshore Voluntary Disclosure Initiative (OVDI) are also designed to enable
tax payers who may have overstated their expenses or deductions to amend their tax returns. The
purpose of these programs is to collect as much tax revenue as possible within a specified, short

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period of time. Tax payers are only given a small window of opportunity to come clean and
comply with their tax obligations. Benefits of filing under amnesty can also reduce the
possibility of other adverse consequences, such as civil or criminal prosecution.

b. India

India is one of those countries that implement tax amnesties frequently in the hope of
encouraging the taxpayers to file their hidden income details. Of the many programs carried out,
there are two important programs that are often cited. First, tax amnesty program conducted on
1981. The government approached the taxpayers with special barrier bonds which they hoped
would attract the wealthy to invest their money in them in exchange for exemptions of all kinds
of taxes on that money. They were able to collect over $1 billion through the sales of these
bonds, but is much less than the anticipated amount. Ultimately it was considered an
unsuccessful program (Luitel, 2014).

The second program took place in 1997, which saw the best results so far in the country’s
history. The policy which was highly publicized and promoted under the slogan “30 percent tax,
100 percent peace of mind”. About 350,000 people took advantage of the program and resulted
in over $2.5 billion as tax revenue for the country (Luitel, 2014).

c. France

France is another country that frequently run tax amnesty programs with an objective to
stimulate repatriation of illegally held capital abroad. Highlighted are two of the many amnesty
programs that were implemented. First, the General and Specific tax amnesty program ran by the
government on 1982. Records show that only about 2,786 participated in the General tax
amnesty program and only 276 people participated in the Specific tax amnesty program. The
government collected $19 million tax revenue for the general tax amnesty program while they
were able to collect $22 million for the specific tax amnesty program. The government
concluded that the program is a failure as the collections were much less than anticipated.

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The second program conducted on 1986 also failed to reach its target according to the French
government. This time they offered a much reduced tax rate 10% compared to the 25% offered
in 1982 program. They hoped that this would show considerable increase in the amount of
collection in terms of tax revenue, but it didn’t turn out that way. The exact collection was not
disclosed but it was informed that it didn’t receive the support they hoped (Luitel, 2014).

4. CONCLUSION

Based on the results of the two policies which have been carried out in the past, Sunset policy
and Reinventing policy, it is safe to say that both had positive effect in terms of increasing the
tax collection numbers. Sunset policy in 2008 helped to increase the number of tax payers by
around 5.36 million and revenues by as much as IDR 7.46 trillion. However the program did not
have a long-lasting effect on the improvement of the tax ratio. This is evident from the decision
by the government to implement a similar policy, Reinventing policy for 2015 to reach its tax
collection target. Analyzing the results of Reinventing policy shows that the government was
able to reach about 82% of its target for 2015, IDR 1,294.2 trillion. This was the highest
recorded collection by the government of Indonesia. Yet the policy is deemed not successful as it
failed to achieve its goal.

The most recent policy implemented, Tax amnesty is expected to be more successful than its two
predecessors as unlike only pardoning the administrative sanctions, in Tax amnesty policy,
government has proposed a reduction in the tax percentage for those voluntarily submit or revise
their previously submitted tax returns. Indonesia tax office targets tax revenue of IDR 1,360.2
trillion for 2016. At the end of first quarter the results shows that collections are below 2.1%
compared to last year’s. But tax office remains optimistic that the numbers will increase and they
will achieve their annual target before the end of the year (Indonesia-investment.com, 2016).
One of the reasons behind their optimism is that the plan of implementing Automatic Exchange
of Information (AEOI) framework with tax haven countries by 2018 will be significant to
encourage people to participate in this tax amnesty program which could possibly be the last in
many years (Diela, 2016).

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Looking at the past results from different countries, it is safe to say that in most times tax
revenue could be improved in the short-term by implementing tax amnesty policies, but the
country will gain little in the long run until they improve their overall systems of tax collection.
Instead by implementing frequent tax amnesties will probably have more negative effect on the
taxpayer numbers as well as the revenue as they will be more reluctant to pay taxes routinely.
Also this will diminish the chance of implementing truly successful programs in the immediate
future. Nevertheless, a well-designed tax amnesty program, accompanied by structural and tax
reforms will be the key to achieve long term success (Uchitelle, 1989).

5. REFERENCES

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