The Commodity Futures Trading Supervisory Agency (Bappebti) of Indonesia has requested the Ministry of Finance, led by Sri Mulyani, to reassess crypto taxation.
Indonesia’s crypto taxation
Indonesia witnessed a notable downturn in its crypto tax revenue in 2023, plunging by 62% compared to the previous year, despite the surge in Bitcoin’s value.
The total tax revenue generated from crypto transactions in 2023 amounted to $31.7 million (Indonesian Rupiah 467.27 billion). This decline was primarily attributed to a significant 51% decrease in crypto transaction volumes during the same period.
The tax regime, introduced by the government in May 2022, imposed dual taxation on crypto transactions, including a 0.1% income tax and a 0.11% value-added tax (VAT), with local exchanges contributing around 0.04% to the national crypto bourse.
According to a regional report, the Commodity Futures Trading Supervisory Agency (Bappebti) has urged the Ministry of Finance, under Sri Mulyani’s leadership, to assess the implementation of crypto taxes.
Tirta Karma Senjaya, Head of CoFTRA’s (Commodity Futures Trading Authority) Market Development and Development Bureau, explained that this tax imposition aligns with crypto’s classification as a commodity or asset. With the transfer of supervision from CoFTRA to the Financial Services Authority (OJK), the Ministry of Finance, particularly the Directorate General (Dirjen) of Taxes, is expected to evaluate these crypto tax schemes.
At the 10th anniversary of the Indodax event in Jakarta on Feb. 27, stakeholders emphasized the importance of evaluating the tax regime, considering the evolving status of crypto as a significant player in the financial sector. Tirta emphasized the necessity of periodic tax reviews, stating, “Usually taxes are evaluated every year.”
Tirta further expressed his belief that the crypto industry and its regulations are relatively new, warranting space for growth until it can substantially contribute to state revenue through tax collections.
In January, Suryo Utomo, the Director General of Taxes at Indonesia’s Ministry of Finance reported a total collection of IDR 71.7 billion from crypto tax and fintech services businesses. He specified that IDR 39.13 billion ($2,492,047.15) came from crypto tax, while fintech taxes amounted to IDR 32.59 billion ($2,075,538.37).
Suryo also provided a detailed breakdown, stating that Rp. 18.25 billion ( $1,162,276.02) originated from PPh Article 22, and the remaining Rp. 20.88 billion ( $1,329,771.13) came from VAT on crypto transactions.
Throughout the preceding year, state revenue from crypto and fintech taxes totaled 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) realized by the end of 2023.
Local exchanges in Indonesia have voiced concerns regarding the high tax rates, citing them as a factor in thinner revenues as users explore alternative platforms.
Suggestions have been put forward to subject crypto transactions solely to income tax, aiming to foster growth and stability in the Indonesian cryptocurrency market.
Tackling illegal crypto exchanges
In May 2023, the Blockchain Association of Indonesia uncovered a troubling discovery: the presence of 303 illicit crypto exchanges operating within the country. This revelation poses a significant threat to Indonesia’s formal tax system, as it undermines efforts to regulate and tax cryptocurrency transactions effectively.
The proliferation of unauthorized exchanges not only jeopardizes the integrity of the tax system but also raises concerns about potential revenue losses for the government.
These unregulated platforms offer users avenues to conduct crypto transactions beyond regulatory oversight, complicating tax authorities’ efforts to monitor and tax these activities accurately.
Last year, the Bali province of Indonesia implemented a ban on the use of cryptocurrencies as payment methods for foreign tourists. This measure is part of a larger initiative to reinforce the country’s official currency, the rupiah, as the sole legal tender.
The Bali Provincial Government has issued warnings, stating that severe consequences such as deportation, administrative penalties, criminal charges, closure of businesses, and other strict sanctions will be imposed on foreign tourists found violating this ban.
Trisno Nugroho, the head of Bank Indonesia’s Bali Representative Office, reiterated that while cryptocurrency trading is permissible in Indonesia, using cryptocurrencies as a form of payment is not allowed.
This prohibition on crypto payments for tourists in Bali is a component of a broader strategy to oversee and manage the utilization of cryptocurrencies throughout the nation.
