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Crypto Asset Tax: Competitiveness and Industrial Growth in Indonesia

JAKARTA, Indonesia, Jan. 16, 2024 /PRNewswire/ — The crypto asset market, which previously experienced a high transaction volume, faced a significant decline in 2023. In this article, Asosiasi Blockchain Indonesia will review the causes of this shrinkage in depth, analyze the latest data, explore responses from business actors and government bodies, and underline the factors influencing the dynamics of the crypto asset market.

The Decrease in Crypto Asset Transactions and Its Causes
The decrease in crypto asset transactions has captured worldwide attention, fueling intense discussions within the market. Several issues, such as the collapse of FTX in 2022 and lawsuits from the U.S. Securities & Exchange Commission (SEC) against Binance and Coinbase. These issues are seen as catalysts for the diminishing consumer interest in crypto assets on a global scale, consequently leading to a notable decrease in transactions within the Indonesian market.

As known, the Bitcoin value in the global crypto market has once again been recorded at US$44k  or around IDR 683 million, reaching its highest level for the first time since April 2022. Data from the Commodity Futures Trading Supervisory Agency (Bappebti) shows that the value of crypto asset transactions from January to November 2023 has reached IDR 122 trillion. Despite the rise in Bitcoin value, this figure indicates a significant decrease compared to the previous year, which reached IDR 306.4 trillion and is even much lower than the peak period in 2021, which reached IDR 859.4 trillion. The question remains: What factors caused the decrease in transaction volume?

Various complex factors contribute to this decline. “The reason is that the peak period has passed, interest has waned, and the real sector at that time was not yet thriving due to the pandemic”, said Hasan Fawzi, Chief Executive Supervisor of the Financial Sector Technology Innovation, Digital Financial Assets, and Crypto Assets Sector, and concurrently Member of the OJK Board of Commissioners. According to CNBC Indonesia, OJK explained that high tax rates were one of the causes behind the decline in crypto asset transaction volume.

Crypto Asset Tax
Since May 2022, every crypto transaction in Indonesia has been subject to a Value Added Tax (VAT) of 0.11% of the transaction value for exchanges registered with Bappebti and an Income Tax (PPh) of 0.1%. Let’s explore how crypto asset transaction costs compare between registered and unregistered exchanges under Bappebti. Here’s an illustration:

Comparison of Crypto Asset Transaction Fees
Registered and Unregistered Exchanges

Registered Exchanges under Bappebti

Unregistered under Bappebti

  • Buy BTC                                                         : 0.10%
  • VAT                                                                                : 0.11%
  • Sell USDR                                                      : 0.10%
  • Sales Income Tax                                            : 0.10%

Total commission per transaction
must be charged (including tax) : 0.41%

  • Transaction Fee                                     : 0.00% – 0.1%

 

 

Total transaction costs (including tax): 0.00% – 0.1%

*This is an example of a general overview of transaction fees – each exchange can have a different percentage

The data above shows a significant difference in the total transaction costs on registered exchanges, which tend to be higher. When designing tax policies for crypto assets, it is crucial to consider the overall impact on the industry’s growth.

In response to this challenge, Daniel Sukamto, CEO of digitalexchange.id, expressed, “It is hoped that there will be an adjustment to tax rates that will not burden the users”. Oscar Darmawan, CEO of Indodax, also added, “This is to ensure that users can make transactions more freely without feeling burdened”. This effort is anticipated to positively stimulate the increased tax revenues, as users will likely conduct more transactions on officially registered crypto asset industry platforms in Indonesia.

Implementing taxes on crypto assets positively impacts the industry, as a significant contributor to the Indonesian economy. Moreover, this will create transparency and support the industry’s sustainability at the national level. “With the implementation of more competitive and cooperative tax policies, it is hoped that this will result in more increased transactions,” said Robby, Chairman of the Indonesian Blockchain & Crypto Asset Traders Association (A-B-I & Aspakrindo).

Solutions for Crypto Asset Tax
In addition to adjusting tax rates, the Association hopes to have the opportunity to discuss with the Directorate General of Taxes (DJP) to provide an overview and find mutually beneficial solutions to ensure the crypto industry’s growth in Indonesia and optimize tax revenues. Yudhono Rawis, CEO of Tokocrypto, conveyed several examples of concrete solutions, including:

  • Adjusting crypto asset tax rates to make transaction fees more competitive for customers on registered exchanges.
  • Implementing a tax amnesty program for taxpayers with crypto assets abroad to increase crypto tax revenues in Indonesia.

Not only that, Asih Karnengsih, Executive Director of A-B-I & Aspakrindo, also presented several other solutions:

  • As Law No. 4 of 2023 concerning Strengthening and Development of the Financial Sector (UU PPSK) classifies crypto assets as digital financial assets, there could be an exemption from VAT collection. This aligns with Law No. 7 of 2021 concerning Harmonization of Tax Regulations (UU HPP) and Law No. 42 of 2009 (VAT Law), where financial services are exempted from VAT collection.
  • Enforcing tax implementation for unregistered exchanges in Indonesia, as regulated in the Minister of Finance Regulation (PMK) Number 68 of 2022, with a VAT rate of 0.22% and Income Tax (PPh) of 0.2%. This aims to encourage domestic customers to transact on registered exchanges.

Apart from Taxes, How to Encourage the Increased Crypto Transactions?
Bappebti also highlighted their views and solutions regarding the decline in crypto asset transaction volume due to implementing the crypto asset tax. In response, Bappebti will coordinate with the Directorate General of Taxes (DJP) to implement equal treatment in the tax collection for customers who transact on unregistered exchanges.

Not only that, Bappebti said that other initiatives are being pursued to encourage an increase in crypto transactions, such as the establishment of Self-Regulatory Organizations and expanding the services offered by exchanges, such as staking, the development of crypto assets in the form of futures products, evaluate and improve the regulations related to crypto assets, including simplifying the Analytical Hierarchy Process (AHP) method for selecting crypto assets that can be traded in Indonesia. This aims to stimulate an increase in the quantity of types of crypto assets that can be traded without reducing current assessment standards. Kasan, Acting Head of Bappebti, emphasized, “With a more varied selection of crypto asset options, it is hoped to boost public interest.”

The Association has also initiated many discussion forums between business actors and the government, to ensure that the implemented regulations can support the needs and development of the industry. The topics revolve around consumer protection and the competitiveness of domestic business actors. For the initiative, Mobee’s COO & CFO, Methodius Anwir, hopes policymakers can prioritize global insight in drafting regulations to create a competitive industry. This way, all parties can share the same vision in overcoming challenges and creating new opportunities for the sustainable growth of the crypto asset industry.