Indonesia: collapse of tax revenues related to crypto and Bitcoin

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In 2023, something strange happened in Indonesia: there was a 63% collapse in tax revenues from crypto and Bitcoin transactions, despite the significant price increase.

The local newspaper Kontan.co.id reports, citing data provided by the Directorate General of Taxes (DJP) of the Ministry of Finance (Kemenkeu).

Indonesia: the collapse of crypto taxes does not coincide with the rise of Bitcoin

In 2022, a new tax regime for cryptocurrencies was introduced in Indonesia, but the following year there was already a 63% decrease in revenue generated by the new crypto tax regime. 

In fact, during 2023 only 467.27 billion Indonesian rupiahs were collected, equivalent to 31.7 million dollars. 

Always Kontan.co.id also reports that the Director of Public Relations of DJP, Dwi Astuti, stated that special deposits in 2023 amounted to only 127.66 billion rupiah.

The reasons for this drastic decrease have not been communicated, but since the introduction of taxes on cryptocurrencies in 2022 caused many complaints from industry operators, as it had caused a decrease in crypto transaction volumes in Indonesia, it is hypothesized that several users and companies have moved their crypto activity to foreign exchanges.

Crypto taxes in Indonesia

The new tax regime introduced in May 2022 with regulation 68/PMK.03/2022 of the Ministry of Finance regarding value added tax and income tax on cryptocurrency trading, has imposed on Indonesians an income tax of 0.1% and a value added tax of 0.11% on each crypto transaction.

So it’s not about taxes on any capital gains, or on the sales of cryptocurrencies and Bitcoin, but on any crypto transaction.

In addition, starting from 2022, even crypto exchanges themselves are required to pay taxes equal to about 0.04% on transactions. 

Once discovered, in 2023, that they had paid a lot of taxes on crypto transactions made in 2022, Indonesian users easily opted for a lower number of transactions. They may have also moved their crypto activity to foreign platforms in order to try to hide as many transactions as possible from the local tax authorities. 

So far, the Indonesian DJP claims to have collected a total of 1,110 billion rupiah in crypto taxes. 

The contrast of tax revenues in Indonesia with crypto and Bitcoin prices

Instead, in the rest of the world, where individual transactions are not taxed, not only did the number of transactions not decrease during 2023, but it is possible that tax revenue has increased. 

In fact, where capital gains taxes are paid, which is the case in almost all the world, in 2022 the falling prices have greatly reduced both the capital gains and the tax revenue. 

Instead, in 2023 with prices on the rise, capital gains have increased significantly, and therefore probably also tax revenues. 

With a tax regime like Indonesia’s, the population is effectively discouraged from using and trading cryptocurrencies. 

At this point, it is worth mentioning the example of Germany, where not only capital gains are taxed, but they are only taxed if cashed out within the first 12 months from the purchase of cryptocurrencies, because those who hold them for more than 12 months are exempt from taxation. 

Indonesia and cryptocurrencies

Indonesia is a very populous country (273 million inhabitants), but certainly not crypto-friendly. 

Right in front of the island of Sumatra there is Singapore, which is one of the main crypto hubs in Southeast Asia.

In that area of the world there are the Philippines that are trying to exploit cryptocurrencies to attract capital and companies, and not far away there is Australia which is a decidedly crypto-friendly country. 

The attitude of Indonesia is therefore anomalous, even for Southeast Asia. It belongs to one of those relatively few countries in the world that have actively tried to hinder the spread of the use of cryptocurrencies. 

Note that in recent years the Indonesian rupiah (IDR) has lost some value, for example compared to the US dollar. 

After the collapse of 2020, it lost only 7% from April to October 2023, and then slightly recovered in the following months. 

Overall, it has depreciated by 16% against the dollar in less than 10 years, thus experiencing a fairly consistent but contained loss of real value. 

The inflation rate in Indonesia is absolutely under control, so the adverse attitude towards cryptocurrencies seems more like a political decision than a necessity. Probably, the numerous financial scams related to crypto that have been rampant in the country over the years have negatively influenced this decision.