Tax is one of the sources of state revenue which is vital in the interests of state development. The tax collection system is a mechanism used to calculate the amount of tax that must be paid by taxpayers to the state.

Law No.10 of 1994 discusses tax collection in Indonesia. In it, everything related to the subject and tax object has been discussed and regulated.

The essence of this law is that Indonesia in the tax collection system applies the domicile and source principles at once or at one time. Indonesia applies these two principles as an important asset for the country that allows for additional foreign exchange.

As good citizens, it is fitting that we pay taxes obediently. For SMEs, taxes are not only about income tax, but also restaurant tax, value-added tax, export-import tax, and many more.

However, there are still many who do not understand the SME tax collection system that applies in Indonesia. This article will discuss the tax collection system in effect in Indonesia. Check out the explanation below. 

Tax Collection System in Indonesia

The tax collection system can be said to be a method of managing tax debt paid by taxpayers in order to enter the state treasury.

In Indonesia, three types of tax collection systems apply, namely:

  1. Self Assessment System.
  2. Official Assessment System.
  3. Withholding Assessment System.

In order to differentiate the three systems, the following is an overview of the meaning of each of these tax collection systems.

1. Self Assessment System

This system is a tax collection which imposes the determination of the amount of tax that must be paid by the taxpayer concerned.

In other words, the taxpayer is a party that has an active role in calculating, paying, and reporting the amount of tax to the Tax Service Office (KPP). Or it could be through an online administration system that has been created by the government.

In this tax collection system, the government acts as a supervisor of taxpayers. A self-assessment system is applied to the type of central tax. An example is a type of value-added tax (VAT) or income tax (PPh). This tax collection system was introduced in Indonesia after the tax reform period in 1983 and is still in effect today.

However, in practice, this system is not always good because there are also consequences in this tax collection system. This is because taxpayers have the authority to calculate the amount of tax payable by themselves that needs to be paid, so taxpayers will usually try to deposit the smallest possible tax.

To more easily identify the self-assessment tax system, the following are the characteristics of the tax collection system:

  • The taxpayer itself determines the amount of tax owed.
  • The active role of taxpayers in completing their tax obligations starts from calculating, paying, to reporting taxes.
  • The government does not need to issue a tax assessment letter. Unless the taxpayer is late in reporting, is late in paying taxes due, or there is a tax that the taxpayer should have paid but not paid.

3. Official Assessment System

The Official Assessment System is a tax collection system that imposes the authority to determine the amount of tax owed to the tax authorities. What is meant by the tax authorities are the tax officials as tax collectors.

In this tax collection system, taxpayers are passive and the tax payable will only be available after the tax assessment is issued by the tax authorities. This tax collection system can be applied in the settlement of Land and Building Tax (PBB) or other types of local taxes.

In PBB payment, KPP is the party that issues a tax assessment letter containing the amount of PBB owed each year.

So, taxpayers no longer need to calculate the tax payable but rather pay PBB based on the Tax Payable Payment Letter (SPPT) issued by the Tax Office where the tax object is registered.

The characteristics of the Official Assessment tax system :

  • The tax officer calculates the amount of tax owed.
  • In calculating taxes, taxpayers are passive.
  • The tax payable exists after the tax officer calculates the payable tax and issues a tax assessment letter.
  • The government has full rights in determining the amount of tax that must be paid.

4. Withholding System

In this tax collection system, the amount of tax payable is calculated by third parties who are neither taxpayers nor tax officials/tax authorities. An example of a tax that uses a withholding system is a deduction of employee income by the treasurer of the related agency. So, employees no longer need to go to the tax office to pay these taxes.

The types of taxes that use the withholding system in Indonesia are Income Tax Article 21, Income Tax Article 22, Income Tax Article 23, Final Income Tax Article 4 paragraph (2), and VAT.

You, as a business owner or business, as a taxpayer (WP) subject, are certainly obliged to pay taxes to the state. However, apart from being obliged to pay taxes, you also have an obligation to report the taxes that you have already paid. The instrument used for your business tax reporting is a tax return or commonly abbreviated as SPT.

As evidence of tax payment using this tax collection system, it is usually in the form of proof of withholding or proof of collection. In certain cases, you can also use a Tax Deposit Letter (SSP). Proof of deduction will later be attached to the Annual Income Tax Return / Periodic VAT SPT of the taxpayer concerned.

5. Accounting Software Helps Tax Collections Easier

As an SME actor, of course, you must know and understand all tax provisions ranging from the types of taxes to the tax collection system. This will make it easier for you when you are going to pay taxes, given the tax burden that is borne.

As a citizen as well as a good taxpayer, of course, you must obey existing tax regulations, including paying taxes. Don’t forget to pay taxes that are already your responsibility as citizens.

After knowing about the tax collection system in Indonesia, as an entrepreneur, you also have to start calculating how much tax the company should pay.

Accounting management is important so that your company does not have difficulty calculating taxes. If your company wants to obtain ease and accuracy in calculating taxes, then you can use online accounting software.