Indonesia Evaluates Relaxation of Cryptocurrency Tax Policies
Indonesia’s Bappebti, the Commodity Futures Trading Supervisory Board, has asked the finance ministry, with Sri Mulyani at the helm, to reconsider the tax structure applied to cryptocurrencies.
Crypto Taxation in Indonesia
Indonesia experienced a sharp drop in crypto-related tax revenue in 2023, with a 62% decrease from the previous year, despite the price increase of Bitcoin.
The cryptosphere’s tax contribution in 2023 was a total of $31.7 million (467.27 billion Indonesian Rupiah), with the decline mainly due to the crypto transaction volume falling by 51%.
The tax policy, established by the government in May 2022, involves a double tax for crypto dealings – 0.1% as income tax and 0.11% as VAT. Domestic trading platforms account for about 0.04% towards the national crypto exchange.
A local news article informs that Bappebti is advocating a review of the crypto tax laws by the finance ministry, directed by Sri Mulyani.
Tirta Karma Senjaya, head of the Market Development and Development Bureau at CoFTRA (Commodity Futures Trading Authority), mentioned that this taxation complies with the definition of cryptocurrency as a commodity or tangible asset. With the supervisory shift from CoFTRA to OJK (Financial Services Authority), the Ministry of Finance’s Tax Directorate General is anticipated to analyze the crypto taxation policies.
During Indodax’s 10-year celebration in Jakarta on February 27, involved parties stressed the need to re-evaluate the taxation regime, seeing crypto as an emerging powerhouse in finance. Tirta highlighted the essence of annual tax revisions by saying, “Usually taxes are evaluated every year.”
Tirta also recognized the nascent state of the crypto sector and its regulation, arguing for a period of growth before it can make a substantial contribution to public coffers via tax proceeds.
In January, Suryo Utomo, Indonesia’s Director General of Taxes, reported a total collection of IDR 71.7 billion from crypto tax and fintech services. Of this sum, IDR 39.13 billion ($2,492,047.15) came from the crypto sector, while IDR 32.59 billion ($2,075,538.37) originated from fintech services.
Suryo further broke down the numbers, revealing that Rp. 18.25 billion ($1,162,276.02) was collected under PPh Article 22, with the remaining Rp. 20.88 billion ($1,329,771.13) stemming from VAT on cryptocurrency exchanges.
For the previous year, crypto and fintech taxes combined accrued IDR 1.11 trillion ($70,691,856.27), with Rp. 647.52 billion ($41,238,189.88) and Rp. 437.47 billion ($27,860,870.60) secured by year’s end.
Domestic exchanges have raised concerns over these hefty tax rates, which they believe have diluted revenue by prompting users to seek out international trading platforms.
Some proposals suggest applying only income tax to crypto transactions to stimulate the growth and stability of Indonesia’s crypto economy.
Addressing Unauthorized Crypto Exchanges
In May 2023, the Indonesian Blockchain Association identified a worrying trend: the operation of 303 unauthorized crypto exchanges. This discovery is a direct challenge to the country’s established tax framework and threatens its ability to regulate and tax cryptocurrency transactions appropriately.
The spread of these unlicensed exchanges endangers the stability of the tax infrastructure and raises alarms about the potential loss of government revenue.
The illicit operations of these platforms provide a method for users to engage in crypto transactions away from the scrutiny of regulators, making it difficult for tax authorities to track and impose taxes on these transactions.
The following year, Bali, one of Indonesia’s provinces, initiated a ban on cryptocurrency as a payment method for tourists, as part of a larger plan to enforce the rupiah as the exclusive legal tender of the country.
The Bali Provincial Government has signaled that tourists who break this regulation could face heavy penalties, ranging from deportation to criminal prosecution, business shut-down, among other severe disciplinary actions.
Trisno Nugroho, the head of Bank Indonesia’s office in Bali, reiterated that even though trading in cryptocurrencies is legal in Indonesia, using them as a means of payment is not.
This ban is a measure to regulate and control the use of cryptocurrencies throughout Indonesia in a broader sense.
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