Legal Certainty and Simplicity of Tax Administration Increase Investors Investing in Indonesia

The Importance of Legal Certainty for Investors

Tax law certainty needs to be maintained and improved. Legal certainty is one of the main factors for investors in determining the country of an investment destination. Legal certainty is not only a concern for foreign investors but also a concern for domestic investors. With the certainty that the tax law is implemented properly, it is hoped that investors will want to invest in Indonesia. Foreign investors will be enthusiastic about investing in Indonesia and local investors will remain comfortable investing in the country and not invest their capital abroad.

The lack of interest of foreign investors to invest in Indonesia can be seen from the phenomenon of foreign investors who do not choose Indonesia as their investment destination but choose our neighboring countries. After the United States trade war with China, in the period from June to August 2019, 33 companies from China decided to relocate their factories outside of China, none of them relocated their factories to Indonesia, which chose Vietnam there were 23 companies, 10 companies chose Thailand, Malaysia, Cambodia, India, Mexico, and Serbia (World Bank, 2019). Early 2020 Nissan Motor Co., Ltd. officially announced the closure of its factory in Purwakarta, West Java (Dadan Kuswaraharja/detikOto, 2020). On October 23, 2020, Nissan on its official website at Asia. Nissan news announced that it recruited 2,000 new employees for its factory in Samut Prakan, Thailand (detikOto, 2020). The phenomenon of relocation of companies from China who did not choose Indonesia and Nissan Motor which left Indonesia in 2020 and concentrated in Thailand, of course, must be a concern for all of us and become a challenge for our nation to regain the trust of investors. According to the author, one of the factors that reduce the interest of foreign investors to invest in Indonesia is legal uncertainty in Indonesia.

Taxes and Tax Sanctions Investors Worry About

For investors, the imposition of income tax from profits earned is a natural and common practice in the world. Profits earned by investors are taxed following applicable tax regulations, of course, it is understood when investors will invest in a country. Investors will give up investing in a country if the investor is subject to tax and/or tax sanctions due to administration. News of events like this will certainly quickly spread among investors both in their home country and other countries. This news will be a counterproductive advertisement for the investment climate in the country where the incident occurred. There is an adage that the tax takes some of the eggs laid by the chickens and does not take the chickens. When the chicken is taken, then there are no more eggs that can be taken in the future. Chickens must be provided with comfortable conditions so that the chickens are more productive in laying eggs and some of the eggs can be taken as tax.

Regulations Must be Synchronous and Harmonious

Regulations will provide legal certainty if the applicable regulations are in sync with the regulations above and in harmony with other equal regulations. In Indonesia, the synchrony and harmony of a regulation must be following Article 7 of Law Number 12 of 2011 concerning the Formation of Legislation as amended by Law Number 15 of 2019 which regulates the types and hierarchy of laws and regulations. Regulations that conflict with the regulations above result in these regulations having no binding legal force. The regulations that are not in harmony with other regulations will lead to legal conflicts that give birth to legal uncertainty.

The simplicity of Tax Administration Becomes an Investment Attractive

Besides the legal certainty needed by investors, the simplicity of tax administration will also be an investment attraction for investors. Simplicity in tax administration will provide a conducive climate for the business world because entrepreneurs can focus more on advancing their business growth and can compete in running their business. Employers’ time is not wasted on complicated administration. This will support companies in Indonesia to be more efficient and able to compete in the world so that exports can be increased. The growth that occurred in the business world, of course, in the end also contributed positively to the increase in state revenue from the tax side.

Considerable Simplicity of Tax Administration

Simplicity in the administration of tax collection will ease the administrative burden of taxpayers. This will make it easier for taxpayers to carry out their tax obligations. This simplicity of administration is certainly done without sacrificing state revenues. The simplicity of tax administration that can be considered is as follows:

  1. The period of issuance of the Tax Invoice can be simplified to be carried out no later than the end of the month when the submission is made. As we all know, following Article 13 paragraph (1a) letter a of the VAT Law, a Tax Invoice must be made at the time of delivery of Taxable Goods and/or delivery of Taxable Services. Simplification of tax administration by providing flexibility in the time of issuance of Tax Invoices to no later than the end of the month when the submission is made will greatly support the business world so that entrepreneurs can collect faster payments to customers .his. On the other hand, there is no state loss with the flexibility of issuing this Tax Invoice. This has also been supported by a Tax Invoice issuance system using e-Faktur through an application provided by the Directorate General of Taxes which has been very good in its implementation.
  2. Provide flexibility for the issuance of Combined Tax Invoices according to the needs of PKP who submit in the same Tax Period. Currently, by Article 13 paragraph (2) of the VAT Law, the issuance of a Joint Tax Invoice can only be granted to issue 1 (one) Tax Invoice covering all submissions for 1 (one) calendar month. It is necessary to provide flexibility for PKP to issue Joint Tax Invoices for several submissions in 1 (one) Tax Invoice or for submissions that have been made for several days in 1 (one) Combined Tax Invoice. This flexibility will greatly assist PKP in running their business. The restriction on issuing 1 (one) Tax Invoice for all submissions in one calendar month certainly does not provide many benefits for PKP.
  3. Export documents in the form of Notification of Export of Goods (PEB) which have currently been issued using an electronic system through an application from the Directorate General of Customs and Excise, so that it is very good and good in implementation. To encourage exports, investors need to be comfortable with no administrative sanctions that can be imposed from PEB documents. The imposition of administrative sanctions that can be imposed based on Article 14 paragraph (4) of the KUP Law is certainly very burdensome for taxpayers which can be compared to they will experience the loss of chickens if they are imposed with this sanction.
  4. Simplification of the withholding tax system, namely only appointing corporate taxpayers as tax cutters and only withholding income tax from taxpayers who provide services and the status is not a taxable entrepreneur. For Taxable Entrepreneurs (PKP) who provide Taxable Services (JKP) which are currently included in the object of withholding Income Tax Article 23, it can be simplified by making payments made by the PKP concerned based on the Delivery Value of the JKP listed in the issued Tax Invoice. At the same time, this can be used as a model for Article 25 PPh installments. If this method can be adopted by our tax regulations, there will be a lot of administrative efficiency of withholding income tax that will occur.
  5. A Tax Assessment Letter (SKP) based on the results of the audit issued for each Tax Period needs to be simplified to become an SKP issued for one Fiscal Year for the audited Fiscal Year. By the current tax regulations, one letter of objection or appeal is only for one SKP and cannot be combined with other SKPs, even though the type of tax is the same and the tax year is the same. This simplification is to provide a guarantee of justice for taxpayers seeking justice. This will also reduce the burden of tax disputes in the tax courts which are piling up day by day.
  6. To provide justice, it is necessary to review the imposition of administrative sanctions in the form of a 50% fine if the Taxpayer’s appeal is rejected or partially granted as stipulated in Article 25 paragraph (10) of the KUP Law. Likewise with a 100% fine if the Taxpayer’s objection application is rejected or partially granted as regulated in Article 27 paragraph (5d) of the KUP Law. If this fine is to be maintained, then the Taxpayer also needs to be given compensation with a minimum percentage equal to that which can be imposed on the Taxpayer. So that later the fine will be imposed on the Taxpayer only on the rejected net after being offset with partially granted if the value rejected is greater than that which is granted. Or the reward is given to the Taxpayer if the net value is granted after being offset by a portion of the rejected value, this is if the value granted is greater than the rejected value.

Conclusion

Tax regulations that provide legal certainty, provide justice, and simplify tax administration while maintaining the level of state revenue, will provide a conducive business climate in Indonesia. It is hoped that this will attract investors to invest in Indonesia, resulting in more job opportunities, better economic growth, a positive multiplier effect in the national economy, which in turn will increase state revenues from taxes.

Hopefully with more conducive tax regulations, Indonesia will become an attractive country for investors and investors willing to invest in Indonesia. This will encourage the improvement and recovery of the national economy, so that the welfare of the people can be achieved more quickly. Greetings Indonesia Forward, Jaya, and Prosperous.

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