- Indonesia’s crypto tax revenue fell 62% to $31.7 million in 2023, after a new dual taxation system was introduced.
- Bappebti calls for a reevaluation of crypto tax policies due to the industry’s growth potential and regulatory transition challenges.
- The Discovery of 303 illegal crypto exchanges in Indonesia threatens tax system integrity and complicates regulatory efforts, risking revenue losses.
In 2023, Indonesia experienced a significant decrease in cryptocurrency tax revenue, dropping 62% from the previous year, despite an increase in the value of Bitcoin.
The revenue from taxes on cryptocurrency transactions totaled $31.7 million (467.27 billion Indonesian Rupiah), mainly due to a 51% reduction in the volume of cryptocurrency transactions. This downturn followed the introduction of a new tax policy by the Indonesian government in May 2022, which implemented a dual taxation system on cryptocurrency transactions.
This system includes a 0.1% tax on income and a 0.11% value-added tax (VAT), with local exchanges accounting for approximately 0.04% of the total contributions to the national cryptocurrency market.
In a recent regional report, the Commodity Futures Trading Supervisory Agency (Bappebti) has called on the Ministry of Finance, led by Sri Mulyani, to reconsider the current cryptocurrency tax policies. Tirta Karma Senjaya, who heads the Market Development and Development Bureau at CoFTRA (Commodity Futures Trading Authority), highlighted that the imposition of taxes on cryptocurrencies is consistent with their classification as commodities or assets. This call for evaluation comes amidst the transition of regulatory oversight from CoFTRA to the Financial Services Authority (OJK), prompting a review of these tax measures by the Ministry of Finance’s Directorate General of Taxes.
During the 10th anniversary celebration of Indodax in Jakarta on February 27, industry stakeholders underscored the need for a reevaluation of the tax regime, in light of the growing prominence of cryptocurrencies in the financial market. Tirta pointed out the essential practice of conducting annual tax assessments, reflecting on the dynamic and evolving nature of the crypto sector.
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Tirta highlighted the nascent state of the cryptocurrency industry and its regulatory framework, arguing that it deserves a period of growth before it can significantly contribute to the nation’s revenue through taxation.
In January, Suryo Utomo, the Director General of Taxes at the Ministry of Finance in Indonesia, reported that the total revenue collected from cryptocurrency and fintech service businesses amounted to IDR 71.7 billion. Of this, IDR 39.13 billion (approximately $2.49 million) was attributed to cryptocurrency taxation, while the remaining IDR 32.59 billion (around $2.08 million) came from taxes on fintech services.
Suryo further detailed that IDR 18.25 billion (about $1.16 million) of the collections were derived from PPh Article 22, with the rest, IDR 20.88 billion (approximately $1.33 million), coming from value-added tax (VAT) on cryptocurrency transactions.
Over the past year, the total revenue from cryptocurrency and fintech taxes reached IDR 1.11 trillion ($70.69 million), with IDR 647.52 billion ($41.24 million) and IDR 437.47 billion ($27.86 million) collected by the end of 2023, respectively.
Local cryptocurrency exchanges in Indonesia have raised concerns about the impact of high tax rates on their earnings, pointing out that these taxes drive users to seek alternative trading platforms.
There have been proposals to apply only income tax to cryptocurrency transactions as a means to promote the growth and stability of Indonesia’s cryptocurrency market.
In May 2023, the Blockchain Association of Indonesia made a concerning discovery, identifying 303 illegal cryptocurrency exchanges functioning within the nation. This situation presents a substantial risk to Indonesia’s structured tax framework, challenging the government’s ability to regulate and appropriately tax cryptocurrency dealings.
The emergence of these unauthorized exchanges compromises the tax system’s reliability and raises alarms over the possible financial implications for the government due to revenue losses.
Such unregulated entities provide avenues for individuals to engage in cryptocurrency transactions outside the purview of regulatory bodies, thereby hindering the tax authorities’ capability to effectively oversee and tax these transactions.
