The Indonesian Commodity Futures Trading Supervisory Authority (Bappebti) has asked the Ministry of Finance, led by Sri Mulyani, to reassess the taxation of cryptocurrencies.
Cryptocurrency taxation in Indonesia
Despite the surge in the value of Bitcoin, Indonesia saw a notable decline in cryptocurrency tax revenues in 2023, plummeting 62% compared to the previous year.
In 2023, total tax revenue generated from cryptocurrency transactions reached $31.7 million (Indonesian Rupiah $467.27 billion). This decline is primarily due to a significant 51% decline in cryptocurrency trading volume over the same period.
The tax system introduced by the government in May 2022 imposed double taxation on cryptocurrency transactions, including 0.1% income tax and 0.11% value added tax (VAT), with local exchanges contributing about 0.04% to national cryptocurrency exchanges.
According to local reports, the Commodity Futures Trading Regulatory Authority (Bappebti) has urged the Sri Mulyani-led Ministry of Finance to evaluate the implementation of cryptocurrency taxes.
Tirta Karma Senjaya, Director of Market Development and Development at the Commodity Futures Trading Authority (CoFTRA), explained that the tax is consistent with the classification of cryptocurrencies as commodities or assets. With the transfer of supervision from CoFTRA to the Financial Services Authority (OJK), it is expected that the Ministry of Finance, especially the Internal Revenue Service (Dirjen), will evaluate these cryptocurrency tax plans.
At the 10th anniversary of the Indodax event held in Jakarta on February 27, stakeholders emphasized the importance of assessing tax regimes taking into account the evolving status of cryptocurrencies, which play a significant role in the financial sector. Representative Tirta emphasized the need for periodic tax review, saying, “Taxes are usually assessed annually.”
Tirta expressed his belief that the cryptocurrency industry and its associated regulations are relatively new and deserve room to grow until they can substantially contribute to state revenue through tax collection.
In January, Suryo Utomo, head of the Indonesian Ministry of Finance’s tax department, reported that a total of IDR 71.7 billion was collected from cryptocurrency taxes and fintech service businesses. He specified that IDR 39.13 billion ($2,492,047.15) came from cryptocurrency taxes, while fintech taxes amounted to IDR 32.59 billion ($2,075,538.37).
Suryo also received Rp. 18.25 billion ($1,162,276.02) came from Article 22 of PPh and the remaining Rp. 20.88 billion ($1,329,771.13) came from VAT on cryptocurrency transactions.
Throughout the previous year, state revenues from cryptocurrency and fintech taxes totaled IDR 1.11 trillion ($70,691,856.27) in Rp. 647.52 billion ($41,238,189.88) and Rp. By the end of 2023, 437.47 billion dollars ($27,860,870.60) had been realized.
Local exchanges in Indonesia have expressed concerns about high tax rates as a factor in declining revenues as users explore alternative platforms.
To promote the growth and stability of the Indonesian cryptocurrency market, a proposal has been put forward to only impose income tax on cryptocurrency transactions.
Response to illegal cryptocurrency exchanges
In May 2023, the Indonesian Blockchain Association made the troubling discovery that there were 303 illegal cryptocurrency exchanges operating within Indonesia. This revelation poses a serious threat to Indonesia’s official tax system as it undermines efforts to effectively regulate and tax cryptocurrency transactions.
The proliferation of unauthorized exchanges not only jeopardizes the integrity of the tax system but also raises concerns about potential revenue losses for governments.
These unregulated platforms provide users with a way to conduct cryptocurrency transactions outside of regulatory oversight, complicating tax authorities’ efforts to accurately monitor and tax such activity.
Last year, the Indonesian province of Bali implemented a law banning the use of cryptocurrency as a payment method for foreign tourists. The bill is part of a larger plan to strengthen the country’s official currency, the rupiah, as the only legal tender.
The Bali provincial government has warned that foreign tourists who violate the ban will be subject to severe punishment, including deportation, administrative penalties, criminal charges, business closures and other strict sanctions.
Trisno Nugroho, head of Bank Indonesia’s Bali representative office, reiterated that while cryptocurrency trading is permitted in Indonesia, using cryptocurrencies as a payment method is not permitted.
The ban on cryptocurrency payments for tourists in Bali is part of a broader strategy to oversee and manage cryptocurrency usage across the country.