Indonesia Reconsiders Crypto Tax After Revenue Drop

Indonesia’s Commodity Futures Trading Supervisory Agency (Bappebti) has called on the Ministry of Finance to reevaluate the country’s approach to cryptocurrency taxation. This comes in the wake of a sharp 62% drop in crypto tax revenue in 2023, a year that otherwise saw an increase in the price of Bitcoin. The decline in tax revenue, which amounted to $31.7 million, was largely due to a 51% fall in transaction volumes of cryptocurrencies.

The Indonesian government had initially introduced a dual taxation policy on cryptocurrency transactions in May 2022. This policy included a 0.1% income tax and a 0.11% value-added tax (VAT) on these transactions, with local exchanges contributing approximately 0.04% to the national crypto market. However, the big decrease in tax revenue has prompted Bappebti to suggest a thorough review of these tax measures.

Tirta Karma Senjaya, who heads the Market Development and Development Bureau at CoFTRA (Commodity Futures Trading Authority), stressed the importance of aligning the tax imposition with the classification of crypto as a commodity or asset. With the oversight of cryptocurrencies moving from CoFTRA to the Financial Services Authority (OJK), the Directorate General of Taxes, under the Ministry of Finance, is now expected to assess the effectiveness of the existing tax scheme.

At the 10th anniversary celebration of Indodax in Jakarta, stakeholders underscored the critical need to revisit the tax regulations given the evolving role of cryptocurrency in the financial market. Tirta highlighted the importance of regular tax assessments, noting that taxes are typically reviewed annually. He also pointed out that the nascent nature of the crypto industry and its regulatory framework necessitates a period of adjustment to enable it to contribute meaningfully to the state’s revenue through taxes.

Local exchanges have raised concerns about the high tax rates, arguing that they are driving users to seek alternatives, thereby reducing their revenues. There’s a growing consensus that applying only the income tax to crypto transactions could promote the growth and stability of Indonesia’s cryptocurrency market