Natural gas, LNG, has been used by some means of public transport, from Bajaj 3 wheelers, up to BRT articulated buses. In Indonesian, we call it BBG, abbreviated from Bahan Bakar Gas. Despite the fact that Indonesia posses a lot of natural gas, the lack of priority has made conversion from petrol to BBG. One incentive for converting to BBG is the price difference between petrol and BBG. Therefore, the lower BBG price, the bigger is the incentive. Similarly, the higher petrol price, the bigger is the incentive. The other incentive for the conversion is the fuel efficiency. Many believe that BBG engine is more efficient than that of diesel. This is not the case, as the energy contained within 1 liter of BBG is roughly 60% of the one within diesel. The actual efficiency is really from the price difference between BBG and diesel. Similarly, or perhaps worst, the gap between diesel and BBG price must be kept wide enough so that those using diesel would want to convert to BBG. Fortunately, the Indonesian government decided to maintain diesel subsidy, with a slight change of distribution method, now it is fixed per volume of diesel bought. It was IDR500 per liter in 2014, but it has been increased to IDR2000 per liter. Therefore, I believe that BBG has enough incentive to make more and more people convert from petrol to BBG, despite the fact that the number of NGV (Natural Gas Vehicles) is less than 5,000 cars.

Despite, the existence of the incentive of converting from petrol to BBG which means that demand for BBG will increase rather soon, the supply of LNG is not an authority of Pertamina which has gas stations (SPBU) all over the country. Up to now, even Jakarta has very limited number of BBG stations (SPBG). Pertamina runs only 2 SPBG stations: 1 in Jakarta and 1 other is in Depok. The plan is actually for Pertamina to have 22 SPBG stations all over Jakarta. Unfortunately, due to difficulty in finding suitable pieces of land, the number of SPBG remains 2. Pertamina’s subsidiary PGN has built 5 SPBGs in Pondok Ungu – Bekasi, Ketapang-Jakarta, Bogor, Surabaya, and Cirebon. Nevertheless, PGN has only been operating SPBG in Surabaya.

To help promote BBG availability,  a local owned company, PT JakPro (Jakarta Propertindo) planned to built 10 SPBGs. Currently, its subsidiary PT Jakarta Utilitas Propertindo operates 7 SPBGs, 6 of them receive BBG supply contract from PGN; while 1 of them receives from Pertamina. The contract signed with PGN uses US dollar as means of payment. While with Pertamina, it is in Indonesian Rupiah. Due to the weakening of Rupiah, combined with toll fee Justpro is suffering a loss of IDR370 per each liter BBG sold. Article 1 number 1 of Bank Indonesia Regulation Number 17/3 / PBI / 2015 on Obligations to Use Rupiah in the Territory of the Unitary Republic of Indonesia (PBI 17/2015) jo. Article 2 letter b of Act Number 23 of 1999 on Bank Indonesia, regulate that all transactions in Indonesia must use Rupiah. Thus, the contract between Jakpro and PGN should be deemed as against the law and must be rewritten. Similarly, according to article 15 Ministry of Energy and Mineral Resources Regulation Number 25 Year 2017 on Accelaration of Utilisation of BBG for road transport, the toll fee of CNG (Compressed Natural Gas) is waived. Therefore, PGN charging toll fee should be also considered against the law. IMHO, if PGN does not want to renegotiate the contract, it cannot force the contract to JustPro. In this case, Justpro should be freed to have a contract with Pertamina to supply its 6 SPBGs.



In its survey, the OECD disclosed that there are high income earners who disproportionately benefit from the tax-free treatment of fringe benefits within personal income tax. I guess the problem is not in the regulations, which could somehow be confusing, but in the understanding of the taxpayers. The DGT could make a clear but interesting infographics on the treatment of fringe benefits which most of them are treated as additional income, upload it to its website and spread it through various channels of social media.

Well, there are two main treatments of taxation on fringe benefits or benefits in kind, which is generally not a tax object (non-taxable) and cannot be deducted from income in calculating payable tax (non-deductible) . This treatment is in accordance with the tax principles, namely taxable deductibles, and if nontaxable then nondeductible.

A) Non-taxable
Based on Article 4 paragraph 3 of the Income Tax Law, “Exempt from tax objects are:
d. reimbursement or compensation in respect of work or services received or obtained in kind and / or benefits from taxpayers or the Government, except those given by non-taxpayers, taxpayers who are subject to final tax or taxpayers using special calculation norms (deemed profit) as referred to in Article 15. ”
Non taxpayer is for example the secretary general office of ASEAN organizations in Indonesia or taxpayers subject to final income tax, for example construction services business taxpayers and taxpayers subject to income tax based on deemed profit, for example taxpayers engaged in overseas shipping services. In these cases, benefits in kind or fringe benefits are taxable income for those who receive or obtain them.

B) Non-deductible
In Article 9 paragraph (1) letter e of the Income Tax Law states: “To determine the amount of taxable income of a domestic taxpayer and a permanent form of business, shall not be deducted:
e. reimbursement or compensation in respect of work or services provided in kind and enjoyment, except the provision of food and beverages for all employees as well as compensation or compensation in kind and enjoyment in certain regions and related to the implementation of work regulated by or based on the Minister of Finance Regulation (PMK);”
However, there are some exceptions for certain purposes so that benefits in kind/ fringe benefits can be deducted in calculating income tax, including:
1. compensation / compensation in kind / benefits given in connection with the implementation of work in the area in order to support government policies to encourage development in remote areas.
2. in kind and fringe benefits given which is a necessity in carrying out work as a safety facility or because the nature of the work requires it, such as clothing and equipment for work safety, uniforms for security guards, worker pick up services and free lodging for ship crew members and similar others.
3. provision or supply of food and or drinks to all employees relating to the implementation of work.
The implementing regulations for this provision are further regulated in the Minister of Finance Regulation Number 83/PMK.03 /2009 dated 22 April 2009 which came into force on 1 January 2009.

The OECD also claimed that the corporate income tax base is also reduced by informality and the prevalence of small firms. Nonetheless, using MIMIC and Monetary Demand approach below, it is found that Indonesia is not the worst. Look at Malaysia which is worse than Indonesia, its corporate tax revenue is much better than Indonesia. Compare also with the Philippines and Thailand, Indonesia is much better of. Hence, the problem may not come from small firms and informal sectors.

Nation MIMIC approach Monetary demand approach Average value
China 13.1 21.0 17.1
Vietnam 15.6 27.9 21.7
India 23.1 21.1 22.1
Indonesia 19.4 31.6 25.5
Malaysia 31.1 27.9 29.5
Lao 30.6 30.6
Philippines 43.3 27.4 35.3
Sri Lanka 44.6 32.1 38.3
Thailand 52.6 26.3 39.4
Cambodia 50.1 50.1

Having said that, the Government has been trying to convert informal sectors to formal ones, from non taxpayers into tax payers, since 2013 with its Government Regulation no 46 year 2013 on final Corporate Income Tax for SMEs, up to its amendment with Government Regulation no 23 Year 2018.

The OECD also explained that tax holidays and other incentives target specific sectors and locations and have been expanded recently to attract new investment. However, these risk eroding the tax base, creating distortions and spurring further regional tax competition. Well, this statement may be well based, but after all there are only several foreign investor who enjoyed these free tax. Most foreign investors prefers conducive business climate to tax incentives. Having said that the tax holidays appears to hit the local industries, some of them are strategic industry, like PT Krakatau Steel which is recently compeeing not in the same playing filed as the Chinese iron company receives tax holidays.


Despite the steady economic growth of around 5% a year in the midst of global competition, changes, frictions and  war, Indonesia still suffers from its low tax revenues. This low tax revenue has triggered issuance of loans either domestic or foreign loans, in any forms from the becoming rare soft loans, blended loans, commercial loans, bonds, and now sukuk. Overall, tax revenues are low in comparison to not only  OECD members, but also to other emerging economies.

The HOD Tax Regulation of  DGT West Jakarta Region Office, Ms Henny Suatri Suardi disclosed the bitter truth of Indonesian taxation at the Tax Talks (Pajak Bertutur) event. Out of the 265 million population of Indonesia, the registered taxpayers are only 35,5 million (13,4%). The registered taxpayers who actually submit tax return (SPT) are 11,1 million (4,19%). The registered taxpayers who finally paid the tax bill are only 1,3 million (0.49%).  According to the Bureau of Statistics Indonesia, in February 2019, the number of population of Indonesia is estimated to be 267 million, with some 129,37 million people are working. Therefore the percentage of workers who actually are paying taxes is just 1%. This then raise a question of where the heck are those 99% workers?

Well, this is not their problem – this is ours, to be specific: our tax system. In the survey, the OECD identified that the problem, among others, lies in the initial income threshold for paying income tax which is relatively high. What the OECD’s economist suggested is actually the income tax threshold (PTKP). In 2019, the threshold for an unmarried taxpayer is set by the DGT at IDR54mio per fiscal year or 4.5mio per month. Of course, the amount of tax threshold increases along with the number of dependants – wife and children. On the other hand, the minimum salary, for example in Jakarta province,  is set by the Provincial Government at IDR3,940,973 per month or IDR47,3mio – being the capital, with high living cost, the region’s minimum wage is higher than the average. If you are an employer and you want to keep your cost low, of course you will pay your workers at the minimum wage. This is most probably where the 99% workers are: they are not paying income tax as their wages are below the threshold.

Regarding the mysterious small number of registered taxpayers filing their tax returns of only 4.19% is actually no mystery at all. This 4.19% population is most probably the workers whose wages are above the tax threshold. In order to increase easeness in handling tax matters or cut the tax administration costs, the DGT has allowed workers receiving wages less than the tax threshold or Zero Tax Return (SPT Nihil) not to submit their tax returns. This provision was amended into the Minister of Finance Regulation (PMK) number 9 year 2018, replacing the Minister of Finance Regulation (PMK) number 243 year 2014 on Tax Returns (SPT). Therefore, if DGT wants all taxpayers to submit their tax returns, the new regulation must be cancelled.  Yet, this is not the problem – the real problem is why the tax threshold is set too high, higher than the average wages.

At its 2018 Economic Survey, the OECD also explained that at medium to-high incomes, marginal tax rates are well below those in other emerging economies. For example: Vietnam highest income tax rate is at 30%. Thailand is at 37%. South Africa is at 40%. China is at 45%.  For comparative study, the list of all countries highest tax rates can be seen at

Indonesia personal income tax rates are set as follows:

Individual Income Tax Tax Rate
 Up to IDR 50 million      5%
 Over IDR 50 million to IDR 250 million     15%
 Over IDR 250 million to IDR 500 million     25%
 Over IDR 500 million     30%

The World Bank’s report titled Indonesia’s Rising Divide which analyzes inequality in Indonesia, says that an increasing concentration of wealth in the hands of a few means that income from financial and physical assets are driving inequality higher. The richest 10 percent of Indonesians own an estimated 77 percent of all the country’s wealth. In fact, the richest 1 percent own half of all the country’s wealth, which is the second-highest level (along with Thailand) after Russia from a set of 38 countries. This means that income from financial and physical assets benefits fewer households in Indonesia than in many other countries. Thus, in line with this report, to improve equality by taking advantage of redistributive impact of taxation, the DGT should increase the highest rate, at least to match Thailand, from 30% to 37%.

In its 2018 Economic Survey, the OECD suggested to gradually lower the top income tax thresholds would make the system more progressive and raise additional revenue. The reason why we should do it gradually is to ensure that we can maximise the amount of tax revenue. To start with, perhaps we could use the figure surveyed recently (see saying that on average of 1,687 individual salary profiles in Indonesia annual net salary is IDR 262,742,497. Aiming at the highest rate of 30%, therefore perhaps we can design the tax brackets as the following:

Individual Income Tax Tax Rate
 Up to IDR 50 million      5%
 Over IDR 50 million to IDR 100 million     15%
 Over IDR 100 million to IDR 250 million     25%
 Over IDR 250 million     30%

If this is not optimised, we could always lower the top income threshold. It is not a try and error, but more to an educated exercise.

In its 2018 Economic Survey of Indonesia, the OECD explained that low incomes and widespread informality imply that the personal income tax net currently includes few individuals and raises scant revenue. This statement infers that there are workers whose income are not taxed due to the fact that they are working in informal sectors. Using MIMIC approach proposed by Schneider et al. (2010) and Monetary Demand approach proposed by Alm and Embaye (2013), the size of informal sector in the year 2000 can be estimated in % of GDP as follows:

Nation MIMIC approach Monetary demand approach Average value
China 13.1 21.0 17.1
Vietnam 15.6 27.9 21.7
India 23.1 21.1 22.1
Indonesia 19.4 31.6 25.5
Malaysia 31.1 27.9 29.5
Lao 30.6 30.6
Philippines 43.3 27.4 35.3
Sri Lanka 44.6 32.1 38.3
Thailand 52.6 26.3 39.4
Cambodia 50.1 50.1

The table shows that the smaller size of the informal economy, the higher economic growth enjoyed by the country. China, India and Vietnam have for some time been the locomotive of the global economic growth. This implies that converting informal into official economy is worthwhile.



One of the main findings from the 2018 OECD Economic Survey of Indonesia is the fact that tax revenues are low relative to other emerging economies

Indonesia 11,6%
Malaysia 15,3%
Philippines 17,0%
Mexico 17,2%
Colombia 19,8%
Turkey 25,5%
South Africa 29,6%
Brazil 32,2%

The OECD explained that taxpayer registration has expanded, but compliance remains a major challenge. Strengthening the tax administration is a government priority and is crucial for improving compliance. Modernising IT systems and processes can promote compliance and improve enforcement. But it will increase demands for highly skilled staff who are in short supply. Effectively using the swathes of new data is crucial to deter future evasion and could help boost revenues. Complexity and frequent policy changes make compliance more difficult. Wider public consultation ahead of proposed changes to tax legislation would enhance the quality of legislation over time.

The 1st tax reform in Indonesia was in the form of tax modernisation. This reform was started to be implemented in 2002 and continued upto the fiscal year of 2008. In 2002, the tax revenue was only IDR210T and it grew up to IDR544T in 2009. The tax revenue still grew and exceeded IDR1,000T for the first time in 2015. Nevertheless, the tax reform seemed to lose its fuel as in 2018 tax revenue was IDR1,316T, which is only 92% of the targeted tax revenue in 2018 State Budget amounting IDR1,424T.

We may be to soon to implement the 2nd tax reform which was aimed at increasing compliance by easing up procedures, minimising tax administration costs. Changes in organizational structure was also made in effort to provide convenience to taxpayers. Account Representative (AR) was introduced to help taxpayers in consulting  their tax issues. DGT tried to remove the stigma that calculating taxes is difficult by providing different approaches: through help desk, kring tax, or through various tax classes, counseling, and some other methods.

The 3rd tax reform was in the form of a tax amnesty program. This reform was aimed at providing easeness for taxpayers who have not reported all of their assets. The assets can be used to estimate the income which has not been reported, hence an income tax could be imposed later on ost registration. Perhaps there was a policy glitch in differentiating rates between taxpayers who want to report their assets and who want to also repatriate their offshore assets, so that most people had chosen to play safe by only repatriate half or less  of their assets to Indonesia.

Declaration of Funds 1 July – 31 September 2016       4%
1 October – 31 December 2016       6%
1 January – 31 March 2017      10%
Repatriation of Funds 1 July – 31 September 2016       2%
1 October – 31 December 2016       3%
1 January – 31 March 2017       5%

The OECD thinks that all these reforms are good, but not enough. OECD suggested that modernising IT systems and processes can promote compliance and improve enforcement. But it will increase demands for highly skilled staff who are in short supply. In my opinion, the DGT has not started the computerisation of all its business processes. The AR program appeared to be a set back in the plan of using computer as a firewall to separate taxpayers from fiscuses. The DGT should instead has an online system to maintain service its taxpayers from general information up to claiming tax refund.  While in England every time I filed for a tax refund, the online system sent my case to different tax judges at different cities. As a result, despite the fact that I did not know any tax official in person, I had full confidence that whoever read my case would decide on my tax refund fairly and properly. The experience of claim it and forget it only to get a nice surprise when a cheque was received in your mail is an unforgettable one.

Effectively using the swathes of new data is crucial to deter future evasion and could help boost revenues. In 2017, the Minister of Finance already signed an MLI agreement and as a result “big date” of taxpayers having assets in Hong Kong and Singapore were received. The question is now, how the DGT can take advantage of the data from AEOI? Does the DGT have researchers to study on these big data? To be able to deal with big digital data, the staff of DGT must be equipped with some data crunching skills at least in using Perl script to get the right data in the least amount of time.

Complexity and frequent policy changes make compliance more difficult. In a dynamic time like now, policy changes are a must if we do not want to be left behind in the global competition. Therefore the complexity of the policies should be kept minimum, even though the frequency of policy changes could not be kept that minimum.  However, in this digital era, the DGT can make a daily updated website with links to most social media: Facebook, Twitter, YouTube, WeChat, Instagram, QQ, QZone, Weibo, Tumblr, Telegram, Reddit, Baidu Tieba, LinkedIn, LINE, Snapchat, Pinterest, Viber, MeWe, and VK. You name it and the DGT updates should be there.

Wider public consultation ahead of proposed changes to tax legislation would enhance the quality of legislation over time. Public consultation does not need to be done in physics. As long as, the DGT can manage a mailing list of its stakeholders: taxpayers, tax consultants, tax academicians, and others; there are online surveys platforms that can be used and some of them are free of charge. A simple questionnaire. not too long, but focused to the point can be managed from Google Forms, SurveyMonkey, Typeform, SurveyLegend, Polldaddy, Survey Planet, SurveyNuts, Zoho Survey, SurveyGizmo, and others. Therefore, please keep in mind that public consultation is not costly and the DGT must conduct more and more public consultation.

To end, you can see that the DGT needs a lot of web programmers, UX researchers, UI designers, Perl data miners, social media communicators, and all the new professions in the field of information of technology. Unfortunately, in the last recruitment for the DGT civil servants, we could not see these positions are offered. Without adapting to the latest information technology, our dream of increasing out tax to GDP ratio to at least 15% will remain a dream.  Peace! 



Ministry of Industry Regulation No 33/2013 on Development of Energy Efficient and Affordable 4 Wheel Vehicle (KBH2) was issued to implement the Government Regulation No. 41/2013 on Taxable Luxury Goods being motorized vehicle. The ministry’s intention was to help middle-low income people to change their motorcycles with affordable cars. To avoid a flux in CO2 emission and to safe the fuel subsidy, the affordable cars must also be fuel efficient. To ensure that the affordable cars will not significantly increase carbon emission, the combustion engine is limited to 1200 cc for a petrol engine or 1500 cc for a diesel one. At the moment the efficiency level is set at 20 km / liter. While to define affordable itself, the Government set a maximum price of IDR 95 millions.

This is actually a well planned policy with a good objective of reducing the risk of accidents resulted from too many passengers carried on a motorcycle. Unfortunately, for traffic congested cities, like Jakarta, this seemingly noble policy was not accepted wholeheartedly. While he was the Jakarta Governor, Jokowi announced to introduce a set of traffic regulation to unravel chronic traffic jams in Jakarta, from ERP (Electronic Road Pricing), Odd-even car plate number restrictions, and a special tax to discourage people from buying and using such cheap and cheerful LCGC or to be accurate KBH2 cars. Unfortunately, the regulations are not popular so that even though such limitation has been prepared since a long time ago, it will need a strong leader to implement them altogether at the same time. Afraid of being accused of ERP being too commercial while Jakarta is a rich province; the governor decided to implement the odd-even restriction first, amids the risk of providing another motivation to have a second odd/even plate car.

Furthermore, the policy of providing affordable LCGC cars has recently been challenged by inflation or the depreciation of Rupiahs. One of the main reasons in that actually LCGC which was set at a maximum price of IDR 95 millions has an exception, i.e. the price may increase if there is an improvement in technology and safety features. This exception has been misused, if not abused, as in reality the LCGC price has been increase substantially from IDR95mio. On average, the LCGC rprice is between IDR 120 and 130 millions, with the highest price of IDR 163,5 millions. In combination with the increasing living costs, many believe that the LCGC policy is no longer effective and call for a revision to mirror the development reality. It is hoped that the revision will no longer the size of engine and its efficiency, but instead the size of GHG emission, especially CO and CO2. This is basically due to the fact that the better is the combustion, the more efficient is the engine, and the less is its carbon emission. But instead of limiting the input or the process, it is best to limit the output.


The technology of electric vehicle has now been equal if not exceeding that of fossil fuel one. There is no gap in engine performance, acceleration, noise, vibration, emission, and others, except for its betterment. In Indonesia, however this condition does not affect the automotive consumer behaviour despite the global trend of going green. The current policy seems to still take side on the brown automotive products which can be shown by the electric vehicle price which is more expensive than that of fossil fuel vehicle. Similarly, the price of hybrid cars are doubled the price of fossil fuel cars.

At the opening of GIIAS 2019, Minister of Finance Sri Mulyani Indrawati said the government had prepared various incentives through a Presidential Regulation on Accelerating the Battery-Based Electric Vehicle Program and Government Regulation on Motor Vehicle VAT, which will be signed by President Joko Widodo this week.

Sri Mulyani revealed that the government would provide several incentives related to the development of electric cars, including imports of electric vehicles given within a certain period of time, as well as providing tax allowances for the spare parts industry.

The government will also provide tax holiday facilities for the integration of electric vehicles with batteries, import duties borne by the government for the import of electric vehicles that get their facilities and raw materials, as well as ease of imports for export purposes.

Meanwhile, for tax incentives on cars, the government will provide tax breaks for sedan vehicles, where the sedans have been taxed higher than MPV vehicles. The regulation of PPnBM will be neutral against types of cars. Once, the sedan type was considered more luxurious than MPV one. The grouping is now divided by engine size: under 3,000 cc, between 3,000 cc – 4000 cc and above 4,000 cc.

Sri Mulyani hopes that with the introduction of the two incentives in the automotive sector, exports can increase to 1 million units from currently only around 300,000 units per year.

Well, we always for the best, but even if these two incentives could not boost car export to 1 million units, Government already gave the right signal to the automotive industry that the new technology of euro 4 engine is appreciate as well as the introduction of EV. Hence, we say welcome to EV, and goodbye to Euro 2 FV.

To err is human and we tend to forget that, up until recently, most of the population of the Western world was illiterate. Learning languages was the sign of a privileged education and translating texts was a task accomplished by a select few for a very small audience — leading to blunders that are still perpetuated today. Here are a few examples:

Horned Prophet

According to the Torah, when Prophet Moses descends from Mount Sinai bearing the ten commandments, he is glowing with karan, “radiance.” But written Hebrew has no vowels, and St. Jerome, the patron saint of translators who learned Hebrew to translate the Bible into Latin, confused karan with keren and turned radiant Moses into a horned one. So with one typo the man gained horns, a representation that can be found in Michelangelo’s Moses, for instance.


Pen is mightier than penis

Branding is serious business and one bad translation is enough to make a product fail. When American Parker Pen expanded into Mexico, its slogan read, “It won’t leak in your pocket and embarrass you.” But the verb to embarrass was confused with embarazada,  a false cognate in Spanish, meaning to impregnate. So, the product was promoted with the translation, “It won’t leak in your pocket and make you pregnant.”


Necromantic Pepsi

In the 1960s, Pepsi’s slogan, “Come Alive With the Pepsi Generation,” arrived in Taiwan China to very negative responses. The reason? In Chinese, the slogan translates to “Pepsi brings your relatives back from the dead.”


Coked Tadpoles

When Coca-Cola first decided to market its brand in China, it was met with an unusual problem – many of the Chinese characters that best represented the sounds in “Coca-Cola” had meanings that didn’t work at all. Two of the most famous phonetic matches (which may have been coined by local Chinese shopkeepers working on their own) translated to the reader as “Female horse stuffed with wax” and “Bite the wax tadpole,” both of which were unworkable, for obvious reasons. Coca-Cola had to do some meticulous research before it jumped into the Chinese market. The company apparently researched around 40,000 Chinese characters before coming to the conclusion of using one that simply meant “Happiness in the mouth”—it’s not perfect, but at least it’s better than a wax tadpole.


Delicious Fingers

We all love Colonel Harland Sanders for one thing … and it’s fried with a blend of seven secret herbs and spices. In fact, did you know that a bucket of the Colonel’s chicken is a Christmas tradition in Japan? But it’s said that KFC got off on the wrong foot when it decided to introduce its brand to the Chinese market in the early 1980s. Legend has it that when KFC opened its doors in Beijing, the franchise accidentally mistranslated their slogan, which gave it a whole new, decidedly unappetizing meaning: somewhere in the translation process, “Finger-lickin’ good” had become “Eat your fingers off,” which, as you can imagine, didn’t sit too well with the local crowd.


Holy Papa

When the Holy Father planned a trip to Miami, a local T-shirt manufacturer came up with the splendid idea of designing commemorative T-shirts for the Spanish-speaking market for the special occasion. Although the intent was good, the message came across as somewhat demeaning for the Pope. I mean, let’s face it, who would like being called a potato? Which is exactly what the T-shirts allegedly read: “I saw the potato.” To be fair, it was an honest mistake, since the Pope is known as “el Papa” in Spanish, and not “La Papa,” as was printed on the T-shirts, which means “the potato.”


Skin Flying

Braniff Airlines decided to add a little extra to the luxury class flights it offered by including comfy leather seats, but what the airline didn’t realize is that marketing a new service to a foreign crowd is often more tricky than it sounds. Braniff decided to go with the slogan “Fly in Leather” which sounded pretty good, until it was translated to the local languages of the Hispanic and Latin America markets, where it read, “Vuela en cuero,” which meant “Fly in Leather” in English, but could also be easily be mistaken for “Vuela en cueros” which meant “Fly Naked.” Not a great way to promote first-class seats, much to the disappointment of middle-aged business travelers, who seemed to be looking forward to, well … a little something extra.


Lazy bankers

In 2009, HSBC bank scrambled to fix a $10 million rebranding campaign after their catchphrase “Assume Nothing” was mistranslated as “Do Nothing” in various countries.


Cold burial

Nikita Kruschev infamously concluded a Cold-War-era speech with a threat directed at America: “We will bury you!” Needless to say, this blood-thirsty statement whipped up American fear and outrage. But the true translation of his words is more like, “we will be present when you are buried,” which is a common Russian phrase meaning, essentially, “we will outlast you.”

False friends

According to interpreter John Coleman-Holmes in his book Mâcher du Coton, a Spanish delegate once apologized to the other delegates at a conference for having a cold: “Estoy constipado, perdóname!” But his Spanish was rendered into French as, “I am constipated, please excuse me!” The interpreter attempted a swift explanation, but was only met with laughter and ridicule.

New Zealand Treaty

Signing agreements is serious business, especially if you’re signing a bad translation. When the Maori chiefs signed the Waitangi Treaty with the English, it was imperfectly translated into the Maori language, stating the natives would have control over their territory but would surrender governance to the English, maintaining authority and control over their land. The English version, however, demanded a surrender of sovereignty in all of its rights and powers. So New Zealand became a colony instead of an independent land.

Holland King

Lodewijk Napoleon was crowned king of Holland in 1806 by his brother, Napoleon Bonaparte. Eager to please his people and to be loved by the general population, he changed his name from Ludovic to Lodewijk and declared himself Dutch rather than French. His language skills, however, were initially so poor he ended up declaring himself the “Rabbit of ‘Olland” (“Konijn van ‘Olland”) instead of “King of Holland” (“Koning van Holland”).

Pervert President

When US President Jimmy Carter traveled to Poland in 1977 for a news conference, he was subjected to a succession of verbal faux pas. The interpreter responsible for conveying the President’s English into Polish mangled his words, using the occasional Russian term and abusing the Polish language. When the President mentioned he had left the US that morning, the interpreter stated he had left the country never to return. To add insult to injury, the President’s desire to “come to learn your opinions and understand your desires for the future” was rendered erotically as a strong lust to “get to know the Poles carnally.” Last but not least, when Carter stated how happy he was to be in Poland, it was translated as “he was happy to grasp Poland’s private parts”. Things didn’t get much better when the replacement interpreter sat silently while the President spoke. Apparently he could not understand Jimmy Carter’s southern accent and chose not to speak, for fear of committing further diplomatic sins.

Laughter is a must

In 1981, while giving a speech to a small Methodist college in Japan, President Carter opened with a joke. The interpreter spoke to the crowd, and the audience immediately erupted into laughter. Surprised by the joke’s success, Carter asked the interpreter how he’d managed to elicit such a reaction. The interpreter reluctantly admitted that he had said, “President Carter told a funny story. Everyone must laugh.”

Kill Russians

Players of “Call of Duty: Modern Warfare 2” in Japan were gunned down by an unusual translation error. According to the American version of the game, one comment which was made by the leading character clearly states “Remember, no Russian.” A simple and understandable line for the English speaking crowd for them no to speak Russian, but the Japanese translation read, “Kill them, they are Russians.” What happened next? The Japanese players did just what they were told and started killing every Russian character they encountered.



Fiscal decentralisation involves sharing of fiscal powers and decision-making authority with subnational governments. This may involve decentralisation of expenditure responsibilities, tax powers, borrowing powers and regulation of the private sector
Thus, fiscal decentralisation is all about the structure of the public sector for better service delivery.

Recent decades have witnessed a broad-based interest in fiscal decentralisation in both developed and developing countries. International agencies, (i.e., the World Bank, IMF, OECD and United Nations) also support it. Benefits of fiscal decentralisation include greater efficiency and deepening of economic democracy. But, fiscal decentralisation also has some costs.

Some perspective theories on fiscal decentralization include:

  1. The public goods perspective
    Allocative efficiency (Tiebout; Olson; Oates)
  2. The coordination costs perspective
    Costs of decentralisation (Breton & Scott)
  3. The public choice perspective
    Decentralisation v. coercion (Buchanan & Brennan)
  4. The market preserving federalism perspective
    Hard budget constraints (Weingast & Qian)
  5. The incomplete contracts perspective
    Power over policy space (Hart; Grewal & Sheehan)

Regional ‘own’ revenue is rarely sufficient for regional expenditure – VFI requires transfers. In the absence of regional equalisation, the poorer regions will not be able to provide comparable public goods (education, health, infrastructure). Over time, the poorer regions would lose population to the richer regions. Investors may also avoid these regions, creating a vicious circle of decline.

There are two types of regional equalisation:

  1. Capacity equalisation a la Buchanan (1950) is followed in Australia, Canada, Germany
  2. Categorical equalisation a la Mieszkowski and Musgrave (1999) is followed in the USA, and also in Australia through conditional transfers for merit goods, such as education, healthcare, housing and transport.

Capacity equalisation approach leaves the usage of funds to be determined by subnational governments. In the categorical approach, national government makes these decisions.


Australia uses both types of fiscal transfers. GST revenue is distributed among states as general purpose fiscal capacity equalisation payments. Specific Purpose Payments (SPPs) make nearly half of all Commonwealth payments to states. SPPs for education and health account for 70% of all SPPs. CGC and COAG are main players.

In Canada, the role of federal fiscal transfers has been reduced since the 1960s as provinces have gained access to all major taxation powers and become accountable to their taxpayers, rather than to federal government. These features have made Canada an example of market preserving federalism (i.e., reduced role of fiscal transfers and soft budget constraints). Canada also has capacity equalisation transfers.

India’s Constitution provides for a Finance Commission for reviewing and recommending the share of central government tax revenues for the States and its distribution among States. Recently, the 14th FC recommended that the states’ share be increased from 32 percent to 42 percent. The National Development Council plays the role of intergovernmental fiscal coordination.

State and local governments also have power to levy income taxes and sales taxes
USA has few general purpose transfers; virtually all transfers are conditional, and many have matching conditions. There is no fiscal capacity equalisation. The US system of fiscal decentralisation suffers from a high degree of duplication of responsibilities among levels of government.

Moral hazard can cause perverse incentives if regional governments expect that the federal government will eventually bail them out of their budgetary problems – i.e., regional governments behave as if their budget constraints were ‘soft’ and flexible.
This problem can be overcome if the federal government can successfully maintain a firm commitment to the hard budget constraints.

Fiscal transfers require institutionalised intergovernmental cooperation and coordination
In Australia: COAG & Ministerial Councils
In Canada: Council of the Federation
In India: National Development Council, Finance Commission (and Planning Commission till 2014)
In China: No formal/institutional framework where subnational governments rely heavily on fiscal transfers


Intergovernmental fiscal transfers exist in most countries and play an important role in the functioning of the public sector. No standard practice exists, however. Different countries use different types of transfers, based on their historical and social preferences
A transparent framework is needed for effective intergovernmental fiscal coordination in the cases of shared responsibility.

Given a country’s regional disparities, consideration should be given to categorical equalisation for basic education and health
The focus of fiscal transfers should be on outcomes instead of inputs
Objective and measurable indicators should be developed for outcomes
It is better if equalisation payments are rule-based and determined by an independent commission or agency.

Independent research into the working of fiscal decentralisation is highly desirable for continuous monitoring, evaluation and improvement.
Care should be taken to avoid degeneration of intergovernmental cooperation into centralisation – as has been happening in Australia (see, Quote from Justice French 2008)

“Cooperative federalism today is in part extra-constitutional. Driven by political imperatives, it yields results on a consensual basis which go well beyond those achievable by the exercise of Commonwealth legislative power and the separate exercise by the States of those powers. In that sense, the cooperative federalism movement may be seen to overshadow expansive interpretations of Commonwealth power under the Constitution. And in my opinion, although cooperative and thus respecting the formal constitutional position of the States, it contributes towards centralization. For every topic which is treated as national becomes potentially a matter which, somewhere along the line, it can be argued, is best dealt with by a national government. That may in turn be used in future arguments favouring Commonwealth control and accountability in respect of such matters. If the State is not perceived by electors as adequately discharging their constitutional responsibilities, then such perceptions will feed into the legitimisation of national control. A shrinking federation will continue to shrink. The logical outcome is the singular State of a unitary federation. That is the federation you have when you do not have a federation.” (Justice French – 2008)











Getting approval from the Parliament using nationalism of returning Indonesia assets abroad, tax amnesty in Indonesia alleged to be a new tool to support naughty rich people. It was said that the incumbent Minister of Finance has got a list of over 2,000 tax payer names who have assets abroad.

Depending on what your definition of success, but the common definition of a goal being achieved is the target reached in a specified period of time. Thus, the title of this post is the failed tax amnesty. Below is the reason why many people think that the Indonesian tax amnesty has failed:

Target achievement so far:

(in IDR trillion)
Per 28 Sep ’16
 (in IDR trillion)
State Income
      165.0         84.6    51.3%
Repatriation of Funds      1,000.0        142.3    14.2%

Indonesia’s tax amnesty program which was introduced in September 2016 is designed to boost the government’s tax revenue by offering tax evaders attractive rates to come clean and declare their previously undeclared assets (whether stashed at home or abroad in the so-called tax havens). Those who join the program can also repatriate offshore assets into Indonesia, into specifically prepared investment instruments where the funds need to stay for at least three years.


Although the nine-month tax amnesty program runs until 31 March 2017, most tax declarations and fund repatriations are expected to occur before 30 September 2016 as taxpayers can enjoy the most attractive tax rates in the period that ends on 30 September (each quarter the tax tariffs increase).

Last week Indonesian authorities announced that they will be more flexible in terms of administrative procedures in relation to the deadline of the first phase of the tax amnesty program. Attachments to taxpayers’ asset declaration letters can be submitted after 30 September but they will still be able to enjoy the most attractive tax tariffs set in the first phase of the program. The government decided to be more flexible on the request of various businessmen who stated that they required more time to calculate and process documents.

The Indonesian government had collected IDR 84.6 trillion (approx. USD $6.5 billion) in additional tax money under the amnesty program, or roughly 51 percent of its target (IDR 165 trillion). Meanwhile, some 8,500 new taxpayers have been added to the database of Indonesia’s Tax Office since the launch of the program in July 2016.


In order to hurry people who wants to declare their unreported assets, the government introduce a progressive rate of ransom (fee). The rates are as follows:

Time Progressive Fee of Tax Amnesty :

Period Ransom Rate
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%


Unfortunately, asset repatriations are still somewhat left behind. By 11:00 pm on Wednesday, a total of IDR 142.3 trillion (approx. USD $10.9 billion) had been repatriated into Indonesia, or roughly 14 percent of the government’s target (IDR 1,000 trillion). As fund repatriations should become more scarce as we approach the second (and third) phase of the program, implying higher tax tariffs, this government target may not be achieved. If not achieved, this failure is due to the unattractive rates that are offered (compared to the rates that apply in tax havens) and the unattractive requirement to keep assets in Indonesia for at least three years.

Most of the funds that have been repatriated so far into Indonesia originate from Singapore, Cayman Islands, British Virgin Islands, Australia, Hong Kong and China.


Indonesia’s tax amnesty program in 2016/2017 is already more successful compared to similar programs in Italy (2009), Chile (2015), Spain (2012), South Africa (2003), Australia (2014) and Ireland (1993).

The Bank Indonesia Governor Agus Martowardojo said asset repatriations are more important compared to tax declarations in terms of overall economic growth of Indonesia. According to the central bank, if there are asset repatriations worth up to IDR 180 trillion under the tax amnesty program, then it should boost Indonesia’s GDP growth by 0.1 additional percentage point in 2017. The Indonesian government targets for a 5.1 percent (y/y) economic growth pace in the 2017 State Budget.

The Secretary General of the OECD Angel Gurria said that it is not important the amount of money received as ransom now. The most important is that Indonesia has now extended its tax base by over 8,500 new tax payers. He reminded that there are some other routes to tax reformation, such as tax base erosion and profit shifting (BEPS),  agressive tax planning, and transfer pricing, which could be more important.


Tax Amnesty in Indonesia has failed so far, but let us not worry too much as it is just one of tools available for Indonesian tax reform. My personal opinion is that now the ransom rate is no longer attractive, the government needs to introduce a disincentive instead. For example, those 2,000 tax payers will be audited. DG Tax can ask BPKP, BPK, and IG to help tax audit some 2,000 audit objects. Those accountants working outside of DG Tax and IG would be happy to help the government and indirectly the poor people tackle tax abuses.