TaxPrime - Q&A

1. How has the Covid-19 pandemic impacted your work?

At the beginning of pandemic in 2020, with the social restriction policy, external relations with clients and government institutions were temporarily stopped. But we still continued our work and internal communications, thanks to the system we developed before the pandemic that allowed for mobile working. Without doubt, we have implemented Work From Home (WFH) since March 17, 2020, and smoothly shifted from offline to online interactions and meetings. Fortunately, in terms of revenue, we have been less negatively affected by the pandemic. On the contrary, we have continued to grow during it.

2. How has your practice had to adapt, and how do you expect it to change further?

Before the pandemic we had already determined to create an enjoyable working environment for staff, so our people could keep a balance between work and life. Thus, we already considered implementing one day working from home and four days working in the office. In addition, we also anticipated that there may be a force majeure situation ahead, which could limit offline interactions among our people, thus putting our work into chaos and crisis. In light of the aforementioned, we budgeted and realised significant capital expenditure in automating our working systems through the intensive use of technology, and developed a mobile working culture so our people were used to working and connecting remotely. Our task management system – TaxPrime Teamwork – is a well-established and integrated system that we have been developing since 2015, and it played an important role in the smooth transformation to Work From Home beginning in March 2020. This online system allows us to collaborate and consolidate our work and to invite client participation remotely. Thus, each project is carried out properly and in a timely manner with the minimum of offline interaction.

3. How much of that impact will have a permanent, lasting effect?

As we have a vision to create a work and life balance, the culture of Work From Home or remote working will become the main option for the company and for employees. Except for tasks which require face-to-face interaction/meetings, which will be conducted offline.

4. What are the biggest challenges relating to that impact do see as presenting the most challenging obstacle going forward, and how do you plan to tackle it?

To date, we have not faced any obstacles thanks to our well-established TaxPrime Teamwork system, which has been in place since 2015.

5. What is the most significant change to your region/jurisdiction’s tax legislation or regulations in the past 12 months?

At end of 2020, the Government of Indonesia enacted the Omnibus Law, which essentially reforms and amends all relevant laws directly affecting the investment climate and job creation, including tax laws that were revised in the following areas:

a.   Clarify provisions regarding tax subjects;
b.   reduction of tax sanctions;
c.   taxation system towards the territorial base;
d.   dividend arrangement becomes a non-tax object;
e.   expansion of the tax base for VAT;
f.    simplification of tax invoices;
g.   simplify tax credit; and
h.   fiscal facilities/incentives.

In addition, with the Omnibus Law the Government of Indonesia also provides tax facilities to relieve the impact of the pandemic, such as:

• Government Regulation in Lieu of Law Number 1 / 2020 Concerning State Financial Policy and Financial System Stability to Control Corona Virus Disease 2019 (COVID-19) Pandemic and/or in Response to Dangerous Threats to the National Economy and/or the Stability of the Financial System
• MOF Number 23/PMK.03/2020 on Tax Incentives for Taxpayers Affected by the Coronavirus Outbreak
• MOF Number 82/PMK.03/2021 on Tax Incentives for Taxpayers Affected by the 2019 Coronavirus Disease Pandemic

It is known that the Covid-19 pandemic, according to the World Bank, has harmed more than 70% of business sectors. Therefore, the Government of Indonesia also prioritised these incentives to be given to industries experiencing a significant decline in performance due to Covid-19, such as manufacturing, processing, tourism, transportation, and trade industries.

6. What has been the most significant impact of that change?

Governments of countries worldwide have been combating and making policies to guard against the impact of the Covid-19 pandemic. In Indonesia, as aforementioned, the government reformed and amended all relevant laws to create a conducive investment climate and jobs, while also trying to provide a safety net against the pandemic. Tax is one of the reformed laws in the Omnibus Law, and the reformation is expected to have the following impacts:

a. For the business sector:

• Significantly reduce the number of companies that go bankrupt;
• many workers can be saved from termination of employment; and
• assisting companies in managing cash flow so that they continue their business despite experiencing negative growth.

b. For government:

• Not achieving state revenue due to a significant decrease in tax revenue by 18.5%;
• the Government of Indonesia allocates approximately Rp. 695.2 trillion (approximately $49 billion) for the National Economic Recovery Program; and
• a very significant increase in government debt, amounting to almost Rp. 1,000 trillion (however, Indonesia's debt level of GDP is still much smaller than other countries).

7. How do you anticipate that change impacting your work and the market moving forwards?

We have generated composed strategies for the upcoming years we call TaxPrime 2023 Onwards. The strategy has been adapted to the aforesaid regulation in Question 5, as well as for global trends.

8. How has this changed the way you offer tax advice?

We have found no significant changes. It is actually much easier doing projects and tasks since there is no distance limitation; thus increasing work effectivity and efficiency in terms of time and cost.

9. What potential other legislative/regulatory changes are on the horizon that you think will have a big impact on your region/jurisdiction?

Currently, the Indonesia House of Representatives is in the middle of drafting updates on Indonesia Taxation General Provisions and Procedures, Income Tax, Value Added Tax, and Excise. Surprisingly, we are the only tax consultants who were invited to provide inputs and outlooks to the draft of the Bill.

10. What are the potential outcomes that might occur if those changes are implemented?

Currently, the aforementioned Bill is still under review, as we provide significant inputs and outlooks to it.

11. Do you think that change will have a positive effect on both your practice and the wider regional/jurisdictional market?

One of the inputs that we suggest is related to tax agents, thus, in the future it will be easier for tax consultants to provide their services.

12. Are there any regulatory/legislative changes you believe should be implemented in your region/jurisdiction?

Sustainable Tax Law

We encourage the formulation of a sustainable tax law that can be implemented in accordance with the competitive advantages of Indonesia. Indonesia's abundant natural and human resources are, among others, a strength that should be considered in formulating the laws. Even more, by 2045 more than 60% of population will be of productive age, which is a huge human resource market for the global business world. However, such human resources may be worthless if the investment climate is very poor and worsening due to the pandemic.

The business world is currently in a slump due to Covid-19. Tax revenue fell by more than 18%. This condition occurred due to the disruption of the pandemic and disruption of business globally. This must be addressed, it's not just a patchwork. But first we need to explore how the global market will change, and where it will go.

Green Economy Green Energy

Currently, the world is moving towards a green economy, green energy. Meanwhile, in Indonesia there are many natural resources that are the raw materials used to manufacture new renewable energy and other green products, e.g. electric vehicles that allow reduced carbon emissions and pollution, enhanced energy, and resource efficiency. With such natural resources and an abundant population of productive age, Indonesia should play a key role in supporting the acceleration of the green economy and green energy in the global post-pandemic age.

In the digitalisation of economy, Indonesia is also one of the major markets for business. As a sovereign country, unfortunately Indonesia does not yet fully have digital sovereignty. On other hand, there are limited incentives provided by the government to support the rise of local unicorns. Even more, in terms of taxation overseas digital business remains untouched, and, indeed, taxing digitalised business is still challenging, not only for Indonesia but also for the world, while local players are taxed fully. This condition means local and overseas digital businesses are not on an equal footing. Therefore, to restore the balance of competition, the reformation of tax laws is strategically important.

In light of the above conditions, we suggest the theme and vision “Indonesia feeds the world” for the reformation of the Indonesian law system. The reformation of tax laws can begin to encourage that effort.

13. How do you believe those changes would help improve the tax landscape in your market?

We believe it will increase taxpayer compliance levels, current and future tax revenue, tax administration efficiency, and will undoubtedly overcome transfer pricing issues in Indonesia.

14. How would you describe the tax authorities’ approach in your region/jurisdiction?

Indonesia is a developing country that has natural resources and human resources as a market. With a total of around 42,000 tax authority personnel to serve 270 million Indonesian citizens; and where the tax revenues are targeted to support 85% of the state budget, unarguably it is an effort for the tax authorities to collect and administer taxes from taxpayers. The approach of the tax authorities includes integrated services, counselling, monitoring, and law enforcement, where each approach has been conformed accordingly to the era, economic conditions, and technology usage.