Illicit financial flows and tax crime in mining sector in Indonesia

Indonesia ranks seventh in biggest illicit financial flows (IFF) among developing countries for year 2003-2012. While in 2014, IFF in Indonesia in 2014 is estimated reaching IDR 227.75 trillion ($20 billion). Mining sector contributes IDR 23.89 trillion ($2 billion), mainly derived from trade misinvoicing.

Recently, Publish What You Pay Indonesia conducted study on IFF and tax crime in the mining sector in Indonesia. This is an urgent issue, given the fact that Indonesia’s position among the top seven developing countries with highest IFF

Based on PWYP Indonesia’s calculation, the estimation of IFFs in Indonesia in 2014 reached IDR 227.7 trillion, or the equivalent of 11.7% of the revised state budget (APBN-P) for 2014. The mining sector contributes to more than 10% of the total IFFs which is around IDR 23.89 trillion. Around IDR 21.33 trillion comes from trade misinvoicing and IDR 2.56 trillion comes from hot money narrow. There is also a unsurprisingly low tax ratio of the mining sector in 2013, which only reached 9.4%. This low number is closely related to the rampant practices of tax evasion and tax avoidance.