Tax Amnesty Implementation in Selected Countries and Its Effectivity Andrew C. Aseng Faculty of Education, Universitas Klabat, Manado, Indonesia; [email protected]Abstract: Tax is one of the biggest sources of income in one country that need to be monitored thoroughly by the government. However, delinquent taxpayers still exist and cost quite a lot of money to their own countries. In addition, biggest data leak to date, called Panama Papers, seemed to open people eyes on how rich people hide their wealth in tax haven countries that result in tax evasion. To address this problem, and then tax amnesty became a hot topic to study. Thus, this paper discusses about the implementation of tax amnesty in selected countries and which factors that have role in a successful tax amnesty program. Further, impact of tax amnesty in tax revenue as well as pros and cons of this program from literatures are discussed to improve our tax amnesty knowledge. Keywords: Tax, tax amnesty, taxpayers, tax evasion Tax is one of revenue instrument in a country that exists since long time ago. In the bible, there are some stories that are related with tax. It means that tax is part of economy science that are known, studied, and done in centuries by governments in many countries as source of income from taxpayers, individually and institutionally. As one of the biggest, if not the biggest, source of income, it is expected that tax can drive one country’s economy in using its money for infrastructures, pay government and public workers, and so on. Unfortunately, many taxpayers do not fulfill their obligations in paying their taxes. Instead, they put their income in tax haven countries or countries that give various incentives is people put and invest their money in them. In Indonesia alone, a director of PT Bank Mandiri, Mr. Budi Gunadi Sadikin in 2014 estimated that savings from Indonesian people put Singapore are worth Rp. 3,000 trillion, with individual and corporate fund ratio around 50: 50% (“Tax amnesty bagi”, 2015). This huge amount of money would be beneficial if it were in Indonesia. However, those delinquent taxpayers tend to avoid paying tax in Indonesia and instead put their money in other countries with various reasons, such as: lower tax rate compared to Indonesia, higher security system in banking sector, and more stable exchange rate (“Tax amnesty”, 2015). Moreover, in 2015 the world surprised with one of the biggest scandal called Panama Papers. In fact, this scandal is more likely the biggest data leak from Mossack Fonseca, one of the biggest law firm in the world, to date (Harding, 2016). Harding then stated that leak documents uncover how famous people (rich, politician, actor, and public figure) in many countries [including Indonesia] have myriad ways in hiding their wealth secretly in tax haven countries, such as Cyprus, the British Virgin Island, Caribbean, etc.). In doing so, they practice tax avoidance or just pay tax less than what should have been paid in their respective countries. This scandal opened the eyes of many governments in establishing strategies to direct their own taxpayers to obey in fulfilling their obligations in taxation so they can contribute more in national income. In addition, the Organization for Economic Cooperation and Development (OECD) developed a standard, called Automatic Exchange of Information, with intention to reduce and counter tax evasion (OECD, n.d.). This standard has been agreed by 50 countries to commit their exchange of information in 2017 with many countries join later in 2018 (OECD, 2017). Therefore, recently Indonesia have implemented a program, called tax amnesty, with intention to increase tax income as well as to bring in a lot of fund of Indonesian from outside to Indonesia through repatriation. It started from July 2016 through March 2017 that were divided into three phase (three months for each phase). This is a program that Ir. Joko Widodo, the President of Republic Indonesia, signed in as part of economy improvement programs. In implementing this program, Mr. President hopes that there will be a positive impact in tax revenue to “boosting infrastructure spending and growth” (“Indonesia tax amnesty”, 2017, para. 2).
Transcript
Tax Amnesty Implementation in Selected Countries and Its Effectivity
Andrew C. Aseng
Faculty of Education, Universitas Klabat, Manado, Indonesia; [email protected]
Abstract: Tax is one of the biggest sources of income in one country that need to be monitored
thoroughly by the government. However, delinquent taxpayers still exist and cost quite a lot of
money to their own countries. In addition, biggest data leak to date, called Panama Papers,
seemed to open people eyes on how rich people hide their wealth in tax haven countries that result
in tax evasion. To address this problem, and then tax amnesty became a hot topic to study. Thus,
this paper discusses about the implementation of tax amnesty in selected countries and which
factors that have role in a successful tax amnesty program. Further, impact of tax amnesty in tax
revenue as well as pros and cons of this program from literatures are discussed to improve our tax
The results of Argentina’s tax amnesty program were enormous and exceeded the
expectations. Around US$ 177 billion of funds were raised and it set a new record for the country
(Higgins, 2017). Further, Higgins found that 110,000 properties and assets were declared by
owners. Still, there was pessimistic from this result. As shown in Table 1, there were three plans
that Argentines could choose to declare their assets. However, Higgins found that approximately
98% of Argentines opted to pay penalties in cash and only 2% chose the government bonds. In
means that they do not fully trust the government terms of economic trajectory. Despite this, still,
the result showed that tax amnesty program in Argentina still hit a success compared to other
countries.
Brazil
Recent tax amnesty law in Brazil was started on March 30, 2017 as an extension of Brazil’s
Special Regime for Tax and Exchange Legalization (RERCT, Filho, 2017). For information,
RERCT in 2016 required delinquent taxpayers to pay 15% of income tax plus other 15% of
penalty while they were given two options, either repatriate their wealth or keep it abroad
(Constantino & Moniz, 2016). Although the country has been implemented such laws many years
ago, there are few information about those programs. That is, through this latest law, Brazil
government wants to raise funds and increase the country’s economic growth.
New regulations have been socialized in order to minimize unnecessary and unwanted events.
For instance, Constantino (2017) summarized that those who can participate in this law are tax
residents that owned resources or assets and stay in the country by 30 June 2016 as well as people
who do not commit in certain crimes, such as tax evasion, social security contribution evasion,
faking public documents, money laundering, and so on. Further, Constantino explained also that
this law is not for “politicians, public servants . . . their spouses, relatives and relatives by
affinity” (para. 2). This is considered as the government’s strategy to reduce conflict of interest
that potentially might happen. In addition, Filho (2017) stated that eligible taxpayers have to submit the return, pay 15% of income tax of assets abroad that have not been disclosed, or pay
penalty for regularization (around 135% of the income tax of assessed assets).
Unfortunately, the result of this second round tax amnesty law was surprisingly poor. By 31
July 2017, the government only raised 1.615 billion reais ($517 million) in revenue, around half
from the forecasts, which was 3 billion reais (Federowski, 2017). This amount was far from the
first round of tax amnesty law last year (46 billion reais). In addition, there was a scandal
happened during this tax amnesty period. Brazil prosecutors found that graft money worth
US$15m was legalized from the largest corruption scandal (Taylor, 2017).
Fiji
Fiji implemented tax amnesty program back in 2015. According to Fiji Revenue and Customs
Authority (FRCA, 2014), around 8,000 taxpayers owed to the country with amount estimated
US$50.3m. Interestingly, no penalty would be charged for those who can prove that they were
facing difficulties in paying their taxes before. This policy was given by the government so that
taxpayers could comply the program.
Two years later, Fiji government granted a tax amnesty program to encourage the Fijians to
declare their assets and income within Fiji or abroad. The duration of this program is six months,
started from 30 June to 31 December 2017 (Bolanavanua, 2017). Moreover, this time the program
is specialized to two specific taxpayers, which are: first, those who did not pay tax and penalties
of their offshore assets and other income; second is those who waive of all penalties with annual
income below US$1.5m. Like previous program, the government wants all taxpayers comply with
the program and take advantage from it. Unfortunately, no results yet generated for this latest tax
amnesty program because it is still running.
Gibraltar
In 2016, Gibraltar government agreed for a new tax amnesty for six months. The program
itself began midnight on 5 July 2016. This time required “income remitted from abroad that
would otherwise have been subject to taxation in Gibraltar will be liable to a 7.5% levy on the
total amount remitted to Gibraltar or 7.5% on the value of any assets purchased abroad”
(Vaughan, Lavarello, & Pilcher, 2016). Sadly, the results of this tax amnesty program have not
been found yet with no articles gathered share about the information.
Honduras
This country is located in Central America. On 27 December 2016, it published a new tax
amnesty program as part of its decree, called Decree no. 171-2016, which started on 31 December
2016 until 31 March 2017 (“Honduras establishes new tax amnesty”, 2017). According to the
decree found in Section 225, this program for taxpayers who did not submit these documents on
time (see Table 2):
Table 2
Documents Related to Tax Amnesty in Honduras
No. Documents
1 Annual or Monthly Sales Tax Credit Return
2 Monthly Withholding Tax Information Return
3 Tourism Information Tax Return
4 Customs Rectification Returns
5 Tax residency update
6 Administrative notifications
Note. Adapted from Law (2017).
However, this program was subjected to local taxation only, not assets of taxpayers outside
Honduras (“Honduras enacts”, 2017). Further, the article explained that the tax amnesty program
recognized unpaid tax from 2012 to 2016 (amnesty period) with taxpayers only pay 1.5% of gross
income for the highest revenue year and once paid, they would not be audited by tax authorities.
Yet, no information could be found yet about the tax amnesty results in Honduras.
India
India has a long history of tax amnesty program. In fact, the program started right after the
Somehow, it should be noted that tax amnesty program in 1997 seemed to hit a success and
considered to be the most successful tax amnesty program in history. The program called
Voluntary Disclosure of Income Scheme (VIDS) and gathered Rs 10,000 crore in taxes, with
income disclosed around Rs 33,000 crore (Vikraman, 2017). Figure 1 below summarized India’s
various tax amnesty schemes and the results.
T
That is why, in 2016, India government wanted to emulate the 1997 success with a new tax
amnesty program called Income and Assets Declaration Scheme (IADS), which started on June 1,
2016 to September 30, 2016. In this program, taxpayers were charged 45% of tax, consisting 30%
tax, 7.5% surcharge, and other 7.5% of penalty (“Various tax amnesty schemes”, 2017). In return,
they would be free from prosecution. This offer, in fact, is interesting for delinquent taxpayers as
they are given, like a second change to declare their assets and pay their obligations.
After four months of declaration period, approximately US$9.8 billion of assets were
declared, with 64,275 declarations made (Mundy, 2016). This result surpassed the 1997 tax
amnesty result and looking at the amount declared and it seemed a success. However, it was just a
small part of undisclosed earnings, especially assets in abroad. Several government investigators
estimated that around US$500bn still stay in Swiss banks and tax haven countries (“India tax
evasion”, 2016) with between 2002 and 2011 alone Global Financial Integrity from US learned
that US$343bn of assets were sent abroad illicitly (Mundy, 2016). It means that if compared to
US$343b alone, only around 3% of assets were declared by taxpayers. This probably happened
because the government run quite a lot of tax amnesty programs, then making these delinquent taxpayers assumed that more other tax amnesty programs will be offered to them in the future.
Thus, they tend to postpone declaring and paying their taxes to wait for better tax amnesty
schemes for their own good.
Indonesia
Before latest tax amnesty started in the mid of 2016, Indonesia government had previously
implemented four, with last two occurred in 1984 and a similar program, called sunset policy, in
2008 (Ragimun, n.d.). Sunset policy is quite different compared to tax amnesty. While the former
was not successful, the latter did quite good; with new addition of taxpayers around 5.6 million
and income tax successfully gathered approximately Rp. 7.46 trillion that time (Ragimun, n.d.).
It was until 2016, where tax regulator in Indonesia finally did a successful tax amnesty
program. This program was divided into three phases, in which phase one started from July to
Figure 1 India’s Tax Amnesty Schemes (1951 to 2015),
adapted from “Various tax amnesty schemes of India
(2017).
September 2016, phase two began in October to December in the same year, and the last phase,
the three, implemented from January to March 2017 (Direktorat Jenderal Pajak, 2016). Further,
each phase has its own calculation of tax tariff for declaration of funds and repatriation of funds.
Table 3 summarizes the tax tariffs for both mentioned.
Table 3
Tax Amnesty Program Indonesia - Tax Tariffs
Period Tax Tariff
Declaration of Funds 1 July - 30 September 2016 4%
1 October - 31 December 2016 6%
1 January - 31 March 2017 10%
Repatriation of Funds 1 July - 30 September 2016 2%
1 October - 31 December 2016 3%
1 January - 31 March 2017 5%
Note: source: Indonesian Finance Ministry, adapted.
For repatriation of funds, the Indonesian government urged that those funds must be invested
in investment instruments in Indonesia prepared by the Government, Bank Indonesia, and
Otoritas Jasa Keuangan (Financial Services Authority, OJK) with at least three years long of
investment (“Tax Amnesty Program Indonesia”, 2017). Yet, only rupiah-denominated funds are
allowed to be repatriated.
After around nine of months of implementation, total funds declared are approximately Rp.
4,642 trillion [Rp. 4866 after program closed] or $365 billion, with repatriation of funds only
around Rp. 146 trillion compared to target for Rp. 1,000 trillion (Maulia & Suzuki, 2017; “Tax
Amnesty Program Indonesia”, 2017). On one hand, Indonesia tax amnesty program broke world
record and beat other countries [Italy and Chile] that had done tax amnesty in previous years
(Diela, 2016) and that was magnificent. On the other hand, total funds repatriated were not as
expected with just roughly 14% off the target (see Table 4). Meaning to say that, Indonesian
taxpayers are still reluctant to move back their funds to Indonesia and probably waiting for better
Latest tax amnesty program in Israel is in 2016. Initially, the program, called Israeli
Voluntary Disclosure Program, started in 2014 and ended in June 30, 2016 (Neuman, 2016).
However, Israeli government extended it for another six months so taxpayers could submit their
declaration of assets and pay their taxes including penalty until December 31, 2016 (“Israeli
amnesty deadline”, 2016). In fact, Neuman added that this was the second tax amnesty program in
Israel, with the initial program started from November 2011 up to September 2012.
Compared to the initial effort, this second program gathered more participants and much
money. While in 2012 only 1,400 applications with 12b shekels were declared and around 500m
shekels were collected as taxes, the latest program, 10 days before deadline, drawn around 6,000
applicants with 20b shekels (US$ 5.2b) uncovered of income and assets and raised approximately
840m shekels in taxes (Neuman, 2016). Moreover, Neuman stated that 2016 tax amnesty had
given a fast-track option with no negotiations for taxpayers “with undisclosed assets of less than 2
million shekels and a total tax liability of less than 500,000 shekels” (para. 8). This resulted in
more taxpayers and more declaration of assets and income than previous tax amnesty program.
Malaysia
Even though Malaysia has run a tax amnesty program started from March 1 to December 15
2016, there is a limited information regarding the program. Under the program that period, penalties would be reduced or ignored. Table 5 summarized reduced penalties if delinquent
taxpayers declare and pay their taxes. Moreover, Rosley (2016) explained that the program
applies to many kinds of taxes, including: withholding tax, personal income tax, corporate income
tax, real estate property gains tax, and more. It can be said that the government wanted to gather
unpaid taxes as much as they could.
Furthermore, results of tax amnesty in Indonesia, however, have made Malaysian government
realize that they could get the same success as Indonesia’s tax amnesty program. Datuk Jasani,
country managing partner of Grant Thornton Malaysia, urged that Malaysia, through Inland
Revenue Board (IRB), should have a tax amnesty program for six months with 15% tax rate for
undeclared income and assets (Koh, 2017). Because this latest tax amnesty program is not started,
there is no result to share.
Table 5
Reduced Penalties for Taxpayers
No. Penalty Tax Rate Description
1 15-20% tax charged Voluntary disclosure of non-submission of income tax
3 25-35% tax undercharged Voluntary disclosure of incorrect tax returns after the
taxpayer has been informed of the tax audit
4 20-25% tax undercharged Voluntary disclosure within 14 days for the date of the
IRB inspection
5 25-35% tax Discovery by IRB during tax audit or investigation
Note. Source taken from Rosley, F. (2016). IRB’s carrot and stick approach.
Pakistan
Pakistan has implemented several tax amnesty programs since 1950s with various results.
Table 6 below shows nine of those programs started from 1958 to 2013. It can be seen that
Pakistan has gathered a mix of results through nine tax amnesty program over the years. Further,
in 2016, the government proposed some new tax amnesty programs started in January. The first
was a program that will last for two years, ended in 2018 with just 1% tax charged on taxpayers’
income, especially in real estate sector (Arsal, 2016). The second and third program continued the
first program tax amnesty for real estate. While in the second program the government would
settle past transactions in real estate with a fixed tax rate 4-5%, the third program however
reduced the rate to 3% (Rana, 2016a; Rana, 2016b). It was said that the third program launched as
a response to the second program which was unsuccessful and was expected to “whiten about
75% of black money . . . in informal economy” (Rana, 2016b, para. 2).
Lastly, the latest proposal of tax amnesty program is considering by the government to be
implement in 2017. This time, the main point is wealth of foreign assets hidden abroad (“Pakistan
mulls tax amnesty, 2017). In addition, same article suggests that through this latest program,
Pakistan government might collect US$3.5b for tax revenue (around 1% of GDP), with a note that
30% and 8.5% for disclosed foreign assets and tax is levied, respectively. As said, because this
program is new, there is no available data for its results.
Table 6
Tax Amnesty History in Pakistan
No. Year Results
1 1958 71,289 declaration filed
2 1969 19,600 declaration filed
3 1976 N/A
4 1997 Rs 151m tax collected
5 2000 79,411 declaration filed, no overseas assets
6 2008 Rs 2.8b collected, with 2% tax rate
7 2012 Only for funds invested in stock exchange
8 2013 For non-duty paid cars only with 50,000 cars participated
9 2013 For traders in green field industries
Note. Date taken from PK Revenue (2016), adapted.
Rusia
Country that are geographically located in Asia Continent but join the European has
experienced various kind of tax amnesties, with its main program previously happened in 1993
and 2007. In 2007 tax amnesty program, Russia successfully gathered around US$130m for the
first six months’ implementation (Agbonika, 2015). Jump forward to June 2015, however, Russia
faced a failure tax amnesty program because nearly half of Russian wealth still abroad. According
to Verdict Financial survey (2016), it is mainly because the preference of the Russians to invest in
other countries for broader range of investments as well as diversification in general geographic
(Douglas, n.d.).
A latest tax amnesty program in Russia announced by Russia Finance Minister, Mr. Anton
Siluanov, which was an opportunity for taxpayers to declare their undeclared assets up to July 1
2016 (“Russia warns time ticking”, 2016). Further, in order to get an amnesty, taxpayers should
reveal their assets by submitting special declaration to the tax authorities in Russia. The
government said that their data would be safe and protected so it would not be used for criminal
investigation. This was done so taxpayers could put their faith again to the government in hoping that the very latest tax amnesty program would be a hit for Russia. Unfortunately, no data were
found yet about the results, whether how many taxpayers participated, how much worth assets
were declared as well as how much tax were collected throughout the program.
South Korea
South Korea has implemented tax amnesty program two years ago, started from October 1,
2015 to March 31, 2016 for individuals and companies. While no penalties charges for those who
would declare and pay overdue taxes, there would be a charge for overdue amount (0.03%) per
day (Swire, 2015). Swire (2015) further explained that South Korean government would not take
legal action against tax evasion in the past, “except where such funds derive from criminal
activity, such as from embezzlement, breach of trust, or fraud” (para. 3). In addition, the citizens
must report their income (domestic and overseas) while “they were also required to report
overseas financial accounts that are worth more than 1 billion won (US$848,540)” (Kim, 2015,
para. 5). Thus, through efforts made for this program, the government expected they could collect
revenue worth KRW500b or US$424m.
Thailand
At the end of 2015, Thailand announced two tax amnesty laws to encourage taxpayers to
comply with the tax rules. The tax amnesty itself was just short period, which started from
January 1, 2016 up to March 15, 2016 (Richter, 2016). This program was given to Thailand
company or juristic partnership with revenue not more than 500m Bath before December 31, 2015
(“Thailand tax amnesty”, 2016). The result was around 40,000 companies decided to join the
program (Praktikantin, 2016). Yet, no actual result found yet for tax revenue raised by the
government through the program.
Furthermore, additional tax exemptions for small and medium enterprises in Thailand will be
given for one year and reductions by 10% for another year with terms and conditions apply (see
Table 7). What is more, if companies fail to register this tax exemption which started on January
1, 2016 up to December 31, 2019, then they “will not be able to apply for loans from commercial banks, since the banks will then require a tax record before considering a loan” (Parpart, 2016,
para. 11).
Table 7
Tax Exemptions and Reductions for Small Medium Enterprise in Thailand
Net Income 2016 Financial Year 2017 Financial Year
THB 0 – 300,000 Exempt Exempt
THB 300,000 – Exempt 10%
Note. THB= Bath Thailand.
Trinidad & Tobago
Last but not least is Trinidad & Tobago that has run a tax amnesty program from the period
July 1, 2016 until September 16, 2016, the fourth tax amnesty program in the last 10 years
(“Another Trinidad & Tobago tax amnesty”, 2016). This program allowed delinquent taxpayers to
pay overdue and payable taxes from previous years until December 31 2015. Taxes that could be
applied for this program were such as: withholding tax, business levy, corporation tax, income
tax, value added tax, and petroleum tax (“Another Trinidad & Tobago tax amnesty”, 2016). Once
the period over, however, all penalties would be reactivated (Alexander, 2016). After around 2.5
months of implementation, the program raised US$750m in revenue (Taitt, 2016).
Summary
Table 8 below provides a summary of tax amnesty programs implemented by those 14
countries, its durations, and amount declared/collected during the program.
Table 8
Summary of 14 Countries Tax Amnesty Program
No. Country
Year of Tax
Amnesty
Duration
(in
months)
Amount
Declared (in
billion US$)
1 Argentina 2016 9 177
2 Brazil 2017 4 0.517
3 Fiji 2017 6 N/A
4 Gibraltar 2016 6 N/A
5 Honduras 2016-2017 3 N/A
6 India 2016 4 9.8
7 Indonesia 2016-2017 9 365
8 Israel 2016 6 5.2
9 Malaysia 2016 10 N/A
10 Pakistan 2017 N/A N/A
11 Russia 2016 N/A N/A
12 South Korea 2015-2016 6 N/A
13 Thailand 2016 2.5 N/A
14
Trinidad &
Tobago 2016 2.5 0.750
Note. N/A= data are not available.
Factors Success of Tax Amnesty
While some countries succeeded in implementing tax amnesty programs and gather a lot of
funds through repatriation, some also faced failures doing the same. So, this section will discuss
several factors that may contribute in the success of tax amnesty programs.
Make Tax Amnesty Perceived as a Unique Opportunity
Consider tax amnesty implementation in India. Because those were done repeatedly,
delinquent taxpayers were no rush in reporting tax offences. In addition, they waited for another
tax amnesty program so that they could get more incentives from the government (Uchitelle,
1989). This supported by the OECD spokesperson that argued Indonesia should make no another
tax amnesty program so that taxpayers could feel this is their last chance to participate in the
program (as cited in Abraham, 2016). Thus, making tax amnesty occasionally or even better once
in a lifetime is beneficial in getting attention from delinquent taxpayers so they can realize their
obligations in paying taxes in the right way and the right time.
Credibility
Government credibility in exercising and implementing tax amnesty program must be high. In
addition, there should be a full commitment by the government in doing the program. Fitrady
(n.d.) urged that “if there is a lack of credibility, tax amnesty will very likely weaken future tax
revenue by inducing other tax evading behavior” (para. 4). This will make people distrust the
amnesty program and doubt to participate on it.
Full Support in Tax System
This could be done by strengthening enforcement mechanism like monitoring and controlling
by authorities. Tax office should be supported by other agencies, like law enforcement (police,
prosecutors, etc.) and other government agencies, to work hand in hand to achieve a successful tax
amnesty program (Soepriyanto, 2016). There is a need of unity for these agencies in supporting
the program.
Confidential
Delinquent taxpayers include rich and very rich people who are very careful in sustaining
their good name. In Russia, latest tax amnesty was not quite successful because millionaires did
not put trust to the government to handle confidential information (Douglas, n.d.). That is why
they are willing to join tax amnesty program if government can assure that there will be no
publication over their name or their wealth in public. So, confidential is highly appreciated by
them in order to participating in the program.
Push and Pull Strategy
A successful empirical evidence for this strategy can be found in South Africa. While a push
strategy is like giving pressures to taxpayers if they are unwilling to participate in a tax amnesty
program, a pull strategy doing the other way, which is giving incentives to taxpayers so they
might be interested to follow tax amnesty (Ragimun, n.d.). An example for the former is
enhancing audit tax quality so taxpayers will be aware that the governments are being serious in
checking their tax reports before tax amnesty program is implemented. On the other hand, one
example for the latter is giving low tax payable rates or even not giving fines or penalties for
delinquent taxpayers to entice them in participating the program. Follow South Africa footsteps in
push and pull strategy need government support and could work in other countries.
Socialization
Tax amnesty program, if it has been granted by the authorities, need to be socialized as soon
as possible to taxpayers so they can be aware for the program. Furthermore, socialization through
various media such as television, radio, newspapers, brochure, and other media about the timeline,
rules and regulations, as well as its mechanism is very helpful for people to know they are going
to do to apply for the program. If needed, then tax officers could reach and meet directly people in
rural areas to socialize about the program (Aadiaat, 2016). It is good that people can be informed
as the soonest in order for them to have time to prepare everything related to their tax reporting.
Impact of Tax Amnesty on Tax Revenue
There is still a debate whether tax amnesty does have impact on tax revenue or not. Alm &
Beck (1990) found that tax amnesty could have positive impact, especially in compliance of
taxpayers and tax collections, with conditions that people realized paying taxes to their countries
is the rule they have to bear and if future tax amnesties would be harder in terms of package and
punishment than the current one. Moreover, Mikesell and Ross (2012) in their study in the US
found that tax amnesty program did have contributed to public revenue. They explain further that
for the program succeed; it should be open in less than 60 days and be held in the second semester
of calendar year.
However, a study conducted by Alm, Martinez-Vazquez, and Wallace (2009) in Russia found
that tax amnesty is considered to have little impact on tax revenue. Further, the researchers
recommended that it would be better for developing and transitional countries to not include tax
amnesty program for a fiscal strategy. This was supported by Rymanov (2017) that found tax
revenue during tax amnesty “amounted to a relatively small amount of revenues as compared to
the current individual income tax revenues” (p. 124). That is, it has insignificant for government
budgets. Another studies done in Indonesia and Turkey also found tax amnesty program failed to
increase tax revenues target (Farida & Prawira, 2015; Kara, 2014).
Therefore, from several studies it can be concluded that in the short-run, tax amnesty does
have impact on tax revenue. This was experienced in Indonesia and Argentina, in which revenues
collected during tax amnesties were spent for economic development. On the contrary, in the
long-run tax amnesty program has insignificant or even no effect on tax revenue. Therefore, the
government should consider carefully whether they want to implement tax amnesty program or
not in order to raise tax revenue.
Tax Amnesty: Pros and Cons
While many argued that tax amnesty program is beneficial and should be supported, quite few
thought the other way. To summarize, here are some pros and cons about tax amnesty from some
1989; Stella, 1991, as cited in Torgler, B., Schaltegger, C. A., & Schaffner, M., 2003).
Pros
1. Gather more tax income from delinquent taxpayers from their past debts.
2. Improves compliance keeping and monitoring individuals who previously were not on the
tax roles
3. Increase opportunity of tax collections in the future.
4. Easy transition of tax enforcement program.
5. Gets some tax evaders back to the route of honesty
6. Provides short-term revenues to aid the transition to a new tax structure
7. Reduces administrative costs
Cons
1. Frequent implementation leads to unexpected incentive impacts.
2. Decrease the opportunity to voluntarily tax report in the long run.
3. Could penalize regular taxpayers.
4. Could be implied as the government unable to make taxpayers comply with tax laws.
5. Moral costs to behave dishonestly decrease. Personal guilt is removed.
6. Individuals get aware of the presence of non-compliance
While tax amnesty program is quite controversial, with pros and cons from experts, it should
be seen as an opportunity for the government in any country to raise revenue from its taxpayers.
Conclusion and Recommendation
Some countries have implemented tax amnesty programs with its’ own ways and regulations.
Some hit a success, but some experienced otherwise. There are several factors, somehow, that
contribute to a successful tax amnesty program, which are confidential, credibility, full support in
tax system, push and pull strategy, and so on. In fact, fair to say that tax amnesty program is quite
helpful for a country to get fund for its economic development in the short-run. In addition, this
program could be seen as a training program for tax evaders to voluntarily comply with tax
regulations in their own countries, as suggested by Aibangbee and Balogun (2015). Though there
are pros and cons about the program, however, tax amnesty program if well-prepared and well-
executed is beneficial for countries that consider to implements it.
Therefore, for a successful tax amnesty program, it is recommended to have a short-term tax
amnesty program so that individuals and companies could rush in join the program. Further, there
must be a good cooperation between government agencies and law enforcement agencies in
ensuring the program will run well. Moreover, data secrecy is important in maintaining taxpayers
trust to government. Government must guarantee their safety and good image by not leaking their
data used for the program. Lastly, there should be more incentives given to taxpayers if they join
the program earlier by giving a low tax rate and penalties.
There are some limitations to this study. First, this study is literature review study in which
just gathers and analyzes studies and data from other sources. Second, because of time constraint,
information gathered is limited and not all countries that have implemented tax amnesty programs
are analyzed. Thus, it is recommended for further study to expand the data and sample of
countries in order to have more depth understanding and better judgment about the study.
References
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