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Indonesian Taxation

 

© Triple Nine Communication Press

Singapore 2021

82 pages, 8.5-inch x 11 inch

ISBN : 978-1-6780-4670-5

 

Author : Dr Regina Niken Wilantari (Indonesia)

Editor: Adriana Assyami (German)

Layout: Alex Norish (German)

Cover Design : Alejandro Gonzalo (Spain)

Translator : Lilik Sumarsih (Indonesia), Alejandro Gonzalo (Spain)

Photos and Illustrations :

Andrea Piacquadio (Hungary), Artem Beliaikin (Russia), Nataliya Vaitkevich (Valencia).

 

Published on 21 April 2021

In Singapore

 

 

By

Triple Nine Communication Press

No 7 Temasek Boulevard#12-07

Suntec Tower One

Singapore, 038987

Singapore

Website: tripleninecommunication.com

Email: hello@tripleninecommunication.com

 

In collaboration with PT.Frost Yunior and STIE Jaya Negara Taman Siswa Malang

 

Distributed by Triple Nine Communication and partners.

 

Note: It is prohibited to quote or reproduce part or all of the contents of this book in any way, without the written permission of the publisher. This book is distributed to 150 countries on 4 continents (ASIA, EUROPE, AMERICA, AFRICA) with various publishers and partner distributors. You may find and purchase this book with the triple nine communications partner publisher in your country. You may also find this book published with a different ISBN from the official publications in Singapore and Madrid because partner publishers publish with different versions and with different ISBNs.

Foreword

This Indonesian Taxation Book describes taxation in general in Indonesia so that it can provide an overview for business practitioners, especially business practitioners who are not Indonesian citizens. However, they have a business in Indonesia and can be used as a tax textbook for students. This Indonesian Taxation Book discusses 5 general topics including:

  1. Indonesian Tax and Tax Law
  2. Classification of Taxes in Indonesia
  3. Tax Payable, and Tax Collection in Indonesia
  4. General Provisions and Tax Procedures in Indonesia
  5. Indonesia's Fiscal and Macroeconomic Policy

 

The five topics constitute basic knowledge for understanding taxation in Indonesia, including understanding the impact of fiscal policy on Indonesia's macroeconomy. Where Indonesia's macroeconomy is an indicator in making business decisions and investment by international business practitioners who want to invest or open a business in Indonesia

 

The author is working hard to develop this book to its full potential for students. However, constructive criticism and suggestions are open to writers for all parties for the sake of perfection in the development of international economics textbooks.

 

 

 

 

Best regards

 

Dr Regina Niken Wilantari1

 

An Academic and Economic Researcher at the Economics Department, Faculty of Economics and Business, University of Jember, Indonesia

Chapter 1. Indonesian Tax and Tax Law

 

Taxation Illustration, Photo by Nataliya Vaitkevich from Valencia

 

In Indonesia, Taxes Are Obligatory Citizen Contribution. This means that everyone has an obligation to pay taxes. However, this only applies to citizens who have met the subjective and objective requirements. Namely, citizens who have incomes exceeding Non-Taxable Income (PTKP). The current PTKP is Rp. 54 million per year or Rp. 4.5 million per month. That means, if you have an income of more than Rp.4.5 million a month it will be taxable. Meanwhile, if you are an entrepreneur or entrepreneur with turnover, the Final Income Tax rate of 0.5% applies from the total gross turnover (turnover) up to IDR 4.8 billion in one tax year (based on PP 23 of 2018).

 

Taxes are Compulsory for Every Citizen. If someone has met the subjective and objective requirements, then he is obliged to pay taxes. In the tax law, it has been explained, if someone deliberately does not pay the tax that should be paid, then there is the threat of administrative sanctions as well as criminal penalties. Citizens Do Not Get Direct Benefits. Tax is different from retribution. Examples of fees: when you get parking benefits, you have to pay a certain amount of money, namely parking fees, but taxes are not like that. Tax is a means of equalizing citizens' income. So when you pay a certain amount of tax, you don't immediately receive the benefits of the tax paid. What you will get, for example, is in the form of road repairs in your area, free health facilities for families, educational scholarships for your children, and others. Tax is regulated in state law. There are several laws that regulate the mechanisms for calculating, paying and reporting taxes.

 

Taxes are mandatory levies from the people for the state (Walczak et al,2017). Every penny of tax money paid by the people will be included in the state income post from the tax sector. Its use is to finance central and regional government spending for the welfare of the community. Tax money is used for a public interest, not for personal gain. Taxes are a source of government funds to fund development at the central and regional levels, such as building public facilities, financing health and education budgets, and other productive activities. Tax collection can be enforced because it is implemented based on law. The Law of the Republic of Indonesia in the KUP Law Number 28 of 2007, article 1, paragraph 1, defines taxes as compulsory contributions to the state that are owned by an individual or entity that is compelling under law, without receiving direct compensation and is used for the state needs for the greatest prosperity of the people. Tax law or fiscal law is a set of regulations that regulate the rights and obligations as well as the relationship between taxpayers and the government as tax collectors. Tax law is a series of rules that govern how taxes are levied, on what circumstances or events the tax is imposed, and how much or how much tax is imposed. Taxation law or fiscal law is a part of public law that regulates taxation issues between the people as taxpayers and the government as tax collectors (Pistone et al,2019).

 

Tax law or fiscal law is the whole of the regulations covering the authority of the government, to take someone's wealth and hand it back to the community through the state treasury so that tax is part of public law that regulates legal relations between the state and people or (legal) entities that are obliged to pay taxes (called taxpayers). Tax law is a collection of regulations governing the relationship between governments as tax collectors and the people as taxpayers. Tax Law adopts an imperative understanding, which means that the implementation of tax law cannot be postponed, for example in filing an objection or appeal. Before there is a decision from the Director-General of Taxes regarding whether an objection is accepted or rejected, the taxpayer must continue to pay the tax payable that has been determined. If later it turns out that the decision is accepted, then the excess tax payment can be calculated later (compensated or restored). The implementation of tax collection in Indonesia is based on the Constitution of the Republic of Indonesia, namely Article 23A of the 1945 Constitution which reads: "Taxes and other levies of a compelling nature for state purposes are regulated by law". Tax law in Indonesia is divided into:

 

  1. Material Tax Law, namely tax law which contains norms explaining the conditions, actions and legal events that must be taxed, how much, or everything concerning the arising, magnitude and write-off of tax payable and the legal relationship between the government. and taxpayers. Material tax laws include:
  2. UU no. 36 of 2008 concerning Income Tax
  3. UU no. 42 of 2009, concerning Value Added Tax & Taxes

Sale of Luxury Goods

  1. UU no. 20 of 2000, concerning BPHTB
  2. UU no. 12 of 1994, concerning Land and Building Tax
  3. UU no. 13 of 1985, concerning Stamp Duty

 

  1. Formal Tax Law, namely tax law which contains regulations regarding the ways in which material tax law becomes a reality. Formal tax laws include:
  2. UU no. 16 of 2000 as amended by Law no. 28 of 2007,

regarding General Provisions and Tax Procedures.

  1. UU no. 19 of 2000, regarding tax collection by compulsory letter.

 

Tax law is a law that regulates all matters related to a country's fiscal. Every citizen must comply with this law in order to create prosperity and comprehensive development for every region. Likewise, with business actors in Indonesia, business actors must comply with all existing tax laws.

1.1. Types of Taxes in Indonesia

There are several types of taxes levied by the government to the public or taxpayers, which can be classified by nature, collection agency, tax object and tax subject.

 

  1. Types of Taxes Based on Nature

Based on their nature, taxes are classified into 2 types, namely: indirect taxes and direct taxes.

 

Indirect Tax

Indirect tax is a tax that is only given to taxpayers if they carry out certain events or actions. So that indirect taxes cannot be collected periodically, but can only be collected when certain events or actions occur that cause the obligation to pay taxes. For example sales tax on luxury goods (PPnBM), where this tax is only given when the taxpayer sells luxury goods.

 

Direct Tax

Direct tax is a tax that is given periodically to taxpayers based on a tax assessment issued by the tax office. In the tax assessment letter, there is the amount of tax that must be paid by the taxpayer.

 

Direct taxes must be borne by a person who is subject to taxpayers and cannot be transferred to other parties. For example Land and Income Tax (PBB) and income tax.

 

  1. Types of Taxes Based on Collecting Agencies

Based on the collecting agency, taxes are classified into 2 types, namely: local taxes and state taxes.

 

Local Tax (Local)

Local taxes are taxes that are collected by local governments and are limited to the local people themselves, both those collected by the Level II and Level I Local Governments. For example, hotel taxes, entertainment taxes, restaurant taxes, motor vehicle taxes, BPHTB, PBB (rural and urban), and other local taxes.

 

State Tax (Central)

State taxes are taxes collected by the central government through related agencies, namely DGT. For example VAT, Income Tax (PPh), PPnBM, stamp duty, PBB (plantation, forestry, and mining).

 

  1. Types of Taxes Based on Tax Objects and Tax Subjects

Based on the object and subject, taxes are classified into 2 types, namely objective tax and subjective tax.

 

Objective Tax

Objective tax is a tax that is taken based on the object. For example import tax, motor vehicle tax, stamp duty, and many more.

 

Subjective Tax

Subjective tax is a tax that is taken based on the subject. For example the wealth tax and income tax.

 

All administration related to central taxes is carried out at the Tax Service Office (KPP), the Tax Counseling and Consulting Service Office (KP2KP), the Regional Office of the Directorate General of Taxes and the Head Office of the Directorate General of Taxes.

 

Meanwhile, administration related to local taxes is carried out at the Regional Revenue Service Office or the Regional Tax Office under the local Regional Government.

1.2. Tax Functions for the State and Society in Indonesia

Taxes have a significant role in state life, especially development. Taxes are a source of state revenue in financing all required expenditures, including expenditures for development. So that taxes have several functions, including:

 

  1. Budget Function (Budgetary Function)

Taxes are a source of state financial income by collecting funds or money from taxpayers to the state treasury to finance national development or other state expenditures.

 

Thus, the tax function is a source of state income that has the aim of balancing state expenditure with state income.

 

  1. Regulating Functions (Regulatory Functions)

Tax is a tool to implement or regulate state policies in the social and economic field. The control functions include:

 

Taxes can be used to curb the inflation rate. Taxes can be used as a tool to encourage export activities, such as taxes on exports of goods. Taxes can provide protection or protection for goods produced from within the country, for example, Value Added Tax (VAT). Taxes can regulate and attract capital investment which helps the economy to become more productive.

 

  1. Equalization Function (Distribution Tax)

Taxes can be used to adjust and balance the distribution of income with the happiness and welfare of society.

 

  1. Stabilization function

Taxes can be used to stabilize economic conditions and conditions, such as to overcome inflation, the government sets high taxes so that the amount of money in circulation can be reduced. Meanwhile, to overcome economic sluggishness or deflation, the government lowered taxes, so that the amount of money in circulation could be increased and deflation could be overcome (Hassan et al,2020).

 

The four tax functions above are functions of taxes that are commonly found in various countries. In Indonesia, the government focuses more on two tax functions as regulator and budgetary. The government agency that manages state taxes in Indonesia is the Directorate General of Taxes (DGT) which is under the Ministry of Finance.

 

The responsibility for the obligation to pay taxes lies with members of the public themselves to fulfil these obligations, in accordance with the self-assessment system adopted in the Indonesian Taxation System. Self-assessment means the taxpayer calculates, calculates, deposits, and reports his own tax obligations. So it does not force taxpayers to pay as much tax as possible but in accordance with statutory regulations.

 

DGT according to its function is obliged to provide guidance, counselling, service and supervision to the community. In carrying out these functions, DGT tries its best to provide services to the community according to its vision and mission.

1.3. Tax Collection Theory

In principle, the duty of the state is to try and aim to create prosperity for its people. That is why the state must come forward and intervene, be active in the field of community life, especially in the economic sector in order to achieve human welfare (Mumford,2017).

 

In order to achieve and create a prosperous society, it requires substantial costs. For the success of this endeavour, the state seeks financing by collecting taxes. Tax collection or collection is a function that must be carried out by the state as an essential function.

Impressum

Verlag: BookRix GmbH & Co. KG

Texte: Triple Nine Communication
Bildmaterialien: Nataliya Vaitkevich
Cover: Artem Beliaikin
Lektorat: Adriana Assyami
Korrektorat: Adriana Assyami
Übersetzung: Lilik Sumarsih , Alejandro Gonzalo
Satz: Alex Norish
Tag der Veröffentlichung: 27.04.2021
ISBN: 978-3-7487-8128-8

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