The Commodity Futures Trading Supervisory Agency (Bappebti) of Indonesia has requested the Ministry of Finance, led by Sri Mulyani, to reassess the country’s current crypto taxation system. This comes after a significant decline in crypto tax revenue in 2023, despite the surge in Bitcoin’s value.
In 2023, the total tax revenue generated from crypto transactions amounted to $31.7 million (Indonesian Rupiah 467.27 billion), a sharp decline of 62% compared to the previous year. This decrease was mainly attributed to a significant drop in crypto transaction volumes by 51%.
The government had introduced a dual taxation system in May 2022, which imposed a 0.1% income tax and a 0.11% value-added tax (VAT) on crypto transactions. Local exchanges also contributed an additional 0.04% to the national crypto bourse. However, Bappebti has now urged the Ministry of Finance to reassess these taxes under the leadership of Sri Mulyani.
Tirta Karma Senjaya, Head of CoFTRA’s Market Development and Development Bureau, explains that the current tax regime 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 regularly evaluating the tax regime, given the evolving status of crypto in the financial sector. Tirta also stressed the need for periodic tax reviews, stating, “Usually taxes are evaluated every year.”
He also believes that the crypto industry and its regulations are relatively new, and there is still room for growth until it can significantly 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. Out of this amount, 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.
In 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 expressed concerns about the high tax rates, which have led to thinner revenues as users explore alternative platforms. Suggestions have been made to subject crypto transactions solely to income tax to promote growth and stability in the Indonesian cryptocurrency market.
In May 2023, the Blockchain Association of Indonesia uncovered 303 illicit crypto exchanges operating within the country. This poses a significant threat to Indonesia’s formal tax system, as it undermines efforts to regulate and tax cryptocurrency transactions effectively.
The presence of these 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, making it challenging for tax authorities 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 warned 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 part of a broader strategy to oversee and manage the utilization of cryptocurrencies throughout the nation.
