Law No. 14 of 2015 on the 2016 State Budget set out the government’s aim of generating around IDR 1.82 quadrillion in state revenue throughout the course of this year. Up to 80% percent of this target, an amount equal to IDR 1.54 quadrillion, was expected to derive from tax revenue.[1] Unfortunately however, the reality has fallen far short of the plan, as revenue from the tax sector had only reached IDR 518 trillion, or a mere 33.7% of the aforementioned target, by the end of the second quarter of 2016.[2]
 
The issue of non-optimal income tax revenue however has actually been a long-standing problem in Indonesia, and the government has continuously sought solutions over the course of the past decade.[3] One of the most recent strategies proposed by the government is that of a tax amnesty. In essence, a tax amnesty is a program that enables taxpayers to write off their outstanding and payable tax obligations after the taxpayers have first disclosed their assets and paid certain ransom fees. By offering such benefits, the government is expecting to encourage more taxpayers to report their undisclosed assets, both those held in Indonesia and/or those located in foreign countries. These assets may not instantly be able to generate revenue, however they can be taken into account during any upcoming calculations of a taxpayer’s tax obligations over the course of the coming years. In addition, the government will directly gain access to increasing amounts of tax revenue as a result of any paid ransom fees.
 
The idea of a tax amnesty is not actually a new thing in Indonesia, and indeed such amnesties have already been implemented three times previously, specifically in 1964, 1984 and 2008.[4] However, none of these implementations were effective enough to increase Indonesia’s tax revenue, thus debates over the current amnesty have resulted in many parties rejecting the preparation of the current Draft Bill on Tax Amnesty (“Draft Bill”)[5] as per October 2015.[6]  On the other side of the fence however, a number of governments have succeeded in their implementation of tax amnesties (e.g. South Africa, South Korea, Italy, India and Ireland),[7] although these successes largely come across as anomalies caused by the extremely rare chance afforded by a tax amnesty to successfully meet the expected targets.[8]  
 
Nonetheless, claiming to have learned from the experiences of other countries and to have a firm grip on the challenges and opportunities afforded by a potential tax amnesty, the Ministry of Finance was optimistic when it originally proposed the Draft Bill to the House of Representatives, urging that the country attempt another shot at such a policy.[9] Originally proposed back in April, the Law No. 11 of 2016 on Tax Amnesty (“Tax Amnesty Law”) was finally passed by the House on 28 June 2016 and effectively in force on 1 July 2016, and thus a legal framework came into being at the level of law which set out guidelines for the implementation of a new tax amnesty.