For most of the 11 million registered individual taxpayers, filing the 2008 income tax returns before the midnight deadline on Tuesday could be their first experience.
Understandably, tax offices in major cities have been unusually busy, especially over the past few weeks, in coaching first-time filers on how to fill out the tax forms and assess and pay all their due taxes.
It is a good coincidence that the hectic activities at tax offices have taken place amid the hurly-burly of political campaigns for the April 9 legislative election.
Because there is indeed a close relationship between taxation and democracy.
As American political thinker Harry L. Hopkins, the architect of the US New Deal for coping with the Great Depression of the 1930s, once said “we shall tax and tax, spend and spend and elect and elect.”
The rationale is that there is no taxation without representation as citizens demand something – either in the form of public services or stronger say in political decisions on resource allocation – in return for increased taxation.
As the government dependence on tax receipts from the people has increased, so has the interaction between the state and society, forcing the government to be more responsible to its citizens.
This development will exert a political impact as more and more people will see themselves not merely as citizens or ” governed people” but as taxpayers who pay the government and its personnel.
Further down the road, this also requires civil servants to change their mindset from being the ones who regard themselves as the dispensers of free public services to being those responsible for serving the ones who pay for the government operations.
As of last year, only about 2.5 million individual taxpayers regularly filed their annual income tax returns. But concerted campaigns by the taxation directorate general and generous incentives offered to registered taxpayers have succeeded in attracting almost 10 million voluntary taxpayer registrations.
Government regulations have created so many disadvantages for individuals without taxpayer cards that unregistered taxpayers will find it extremely difficult or much more costly to do business transactions such as buying cars, properties or getting bank loans.
Millions more will voluntarily register for taxpayer identification cards.
However, taxpayer registration is only the first step toward tax compliance. And we should magnanimously admit that tax evasion is quite pervasive in Indonesia, as evidenced by its low tax ratio – total tax receipts against gross domestic product – of only 13 percent, compared to more than 20 percent in many other ASEAN countries.
At the end of the day, the incidence of tax compliance will depend not only on the cost or the chance of people being caught for tax evasion but also, and more importantly, on voluntary tax compliance. The tax directorate general will never have enough auditors to thoroughly assess tax returns filed by so large a number of taxpayers.
But voluntary tax compliance, which is prompted by the willingness of people to pay taxes – not by repressive law enforcement – is also influenced by the public’s perception of the integrity of tax officials, the efficiency of tax administration and the government’s credibility in general.
A high degree of voluntary tax compliance thus requires the combination of strong law enforcement, a climate of mutual trust between taxpayers and tax officials and the public’s positive perception of the government.
Herein lies the crucial importance of the anticorruption drive.
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