Indonesia's Finance Ministry to Review Crypto Taxes?

If you are wondering that the national governments aren’t very keen to look at cryptocurrency policy and taxation seriously, it’s time for you to have a close look at Indonesia.

An island country located in Southeast Asia, Indonesia secured the 7th position among all the countries as per Chainalysis’ 2023 Global Crypto Adoption Index. In fact, the country secured the 5th position when it comes to retail DeFi value received.

In 2023, the total number of crypto holders in Indonesia stood at 12.4 million.

The revenue generated from crypto activity in Indonesia is now hitting such a high amount that there is a demand for a revaluation of crypto taxation in the country.

As per a recent local news report, Indonesia’s Commodity Futures Trading Regulatory Agency (CoFTRA or Bappebti) has asked the Ministry of Finance to reassess its crypto tax policy.

The government of Indonesia introduced crypto tax in the country nearly two years ago in May 2022, labelling the asset as a commodity. As of now, the country levies a value-added tax (VAT) of 0.11% on each crypto transaction and a 0.1% tax on income generated from crypto trading.

In January 2024, the Indonesian government collected total revenue of around $2.49 million (Rp39.13 billion) from crypto taxes themselves. In contrast, total revenue from fintech tax in the month was worth around $2.07 million (Rp32.59 billion).

In 2023, crypto tax worth $41.5 million (Rp647.52 billion) and fintech tax worth $27.8 million (437.47 billion) collectively contributed to revenue of $7 million (Rp1.11 trillion).

Bappebti has now asked the Ministry of Finance to reassess its taxation policy regarding crypto as all tax policies are reevaluated on an annual basis.

Crypto is likely to become more significant in the country’s economy over the next few years. As a result, a friendlier crypto tax policy is the need of the hour, added Bappebti.

Multiple Challenges Amid a Growing Userbase

The government needs to address the presence of hundreds of illicit crypto exchanges operating in Indonesia. As per a local report, the Blockchain Association of Indonesia revealed in May 2023 that at least 303 illicit crypto exchanges are operating in the country.

In contrast, only 35 crypto exchanges are officially registered and operational in the country as per the latest information available on Bappebti’s website.

Such a large number of illicit platforms facilitate transactions worth an unimaginable value, with the government losing millions of dollars in revenue. In addition to unregistered transactions, such illicit crypto platforms can also become conduits of money laundering, terror financing and other illegal activities.

In addition, the Ministry, especially the Directorate General (Dirjen) of Taxes, is expected to carry out the transfer of supervision from CoFTRA to the Financial Services Authority (OJK).

It needs to be looked if the government of Indonesia can tackle these challenges and formulate a comprehensive and robust crypto tax policy in the coming months.