Jakarta, Indonesia Sentinel — Indonesia’s Deputy Minister of Finance (Kemenkeu), Anggito Abimanyu, stated the potential for tax revenue from the country’s underground economy, a sector encompassing unrecorded economic activities that evade formal government data and taxation.
“We’re opening our eyes to the significant scope of the underground economy, an activities that aren’t registered, aren’t recorded, and don’t pay taxes. That’s what we’re targeting,” Abimanyu said during a keynote address at a vocational school event at Gadjah Mada University in Sleman, Yogyakarta, Monday October 28.
One example Abimanyu cited was online sports betting, specifically for English football, which has seen significant engagement from Indonesians. According to data from the Ministry of Communication and Information, Indonesian bettors participate heavily in these platforms, most of which are based offshore and thus avoid domestic taxation.
“People are free to bet online which legal in places like the UK, with no fines, no taboo, and no tax implications. But when they win, technically, that should be reported as income and taxed,” he said, adding that the tax authority must develop strategies to capture such income effectively.
Beyond offshore gambling, Abimanyu highlighted online gaming revenue and untaxed imported goods as additional examples of underground economic activities with untapped tax potential.
Anggito said that even though it has become the government’s target, the scheme for imposing income tax (PPh) on underground economic activities is currently being formulated, including for imposing tax on online games. “We need smart approaches to capture these super incomes within the underground economy,” he emphasized.
Prabowo Debt Forgiveness for Indonesia Farmers and Fishermen
Citing from CNBC Indonesia, this underground economy activity has been studied by experts from the University of Indonesia, conducted by Kharisma & Khoirunurrofik in 2019. The research show the vast scale of this sector, with an estimated value of around Rp1,968 trillion ($125 billion), which equates to roughly 11.6% of Indonesia’s GDP in 2021. The study, which analyzed data from 2007 to 2017, suggests that underground economic activity in Indonesia may constitute 3.8-11.6% of regional GDP, averaging 8% per province annually.
Abimanyu concluded that, while the government has recognized the underground economy’s tax potential, implementing effective tax mechanisms will require careful planning. “We open our eyes that there are actually many underground economies that are not registered, not recorded, and do not pay taxes. So we take that potential, and we think about it,” Anggito emphasized.
(Raidi/Agung)
