Indonesia Reevaluates Cryptocurrency Tax Policy

The Indonesian Commodity Futures Trading Supervisory Authority (Bappebti) has approached the Ministry of Finance, directed by Sri Mulyani, to reevaluate the taxation policies on cryptocurrencies.

In 2023, Indonesia observed a significant drop in cryptocurrency tax revenue, decreasing by 62% from the previous year, even though Bitcoin’s value experienced an increase.

The total cryptocurrency transaction tax collected in 2023 was $31.7 million (467.27 billion Indonesian Rupiah), with this reduction largely due to a 51% fall in the volume of cryptocurrency transactions.

Introduced in May 2022, the government’s tax policy on cryptocurrency transactions included a dual tax system, comprising a 0.1% income tax and a 0.11% value-added tax (VAT), with local exchanges contributing approximately 0.04% towards the national cryptocurrency market.

A regional analysis highlights that Bappebti has recommended the Ministry of Finance to revisit the crypto tax enforcement strategy.

Tirta Karma Senjaya, leader of the Market Development and Development Bureau at CoFTRA (Commodity Futures Trading Authority), mentioned that the tax imposition is consistent with the classification of cryptocurrencies as commodities or assets. Following the transition of supervisory duties to the Financial Services Authority (OJK), the Ministry of Finance, especially the Directorate General of Taxes, is anticipated to reexamine these cryptocurrency tax frameworks.

During the 10th anniversary celebration of the Indodax event in Jakarta on February 27, participants stressed the need for a reassessment of the tax policy, acknowledging the growing influence of cryptocurrency in the financial industry. Tirta highlighted the importance of regular tax policy evaluations, noting, “Taxes are typically reviewed annually.”

He also stated that due to the relatively nascent stage of the cryptocurrency industry and its regulatory framework, there should be allowances for its growth before it can significantly enhance state revenues through taxation.

In January, Suryo Utomo, the Director General of Taxes, reported that the Ministry of Finance collected a total of IDR 71.7 billion from taxes on cryptocurrency and fintech services, with IDR 39.13 billion ($2,492,047.15) derived from cryptocurrency taxes and IDR 32.59 billion ($2,075,538.37) from fintech services taxes.

He further detailed that Rp. 18.25 billion ($1,162,276.02) came from PPh Article 22, and Rp. 20.88 billion ($1,329,771.13) from VAT on cryptocurrency transactions.

Over the previous year, the total revenue from cryptocurrency and fintech taxes reached IDR 1.11 trillion ($70,691,856.27), with IDR 647.52 billion ($41,238,189.88) and IDR 437.47 billion ($27,860,870.60) collected by the end of 2023.

Local exchange operators in Indonesia have expressed concerns over the high taxation rates, suggesting they contribute to reduced earnings as traders look for alternatives.

Proposals have been made to apply only the income tax to cryptocurrency transactions to promote growth and stability in the market.

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