PWYP Indonesia publishes report on illicit financial flows and tax crime in the mining sector

According to a 2014 report from Global Financial Integrity entitled “Illicit Financial Flows from Developing Countries: 2003- 2012”, Indonesia ranks seventh of countries with the largest illicit financial flows (IFF). In 2014 IFF in Indonesia is estimated at a total of IDR 227.75 trillion ($20 billion), the mining sector contributes IDR 23.89 trillion ($2 billion), mainly derived from trade mis-invoicing.
Late 2015 Publish What You Pay Indonesia conducted a study on IFF and tax crime in the mining sector in Indonesia. This is an urgent issue, given the sad reality of Indonesia among the top seven developing countries with highest IFF.

Based on PWYP Indonesia’s calculation, using the GFI methodology, the IFF total of IDR 227.7 trillion in Indonesia is 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 (80%) comes from trade misinvoicing while the remainder of IDR 2.56 trillion comes from hot money narrow. There is also an unsurprisingly low tax ratio of the mining sector in 2013, only reaching 9.4%. This low number is closely related to the rampant practices of tax avoidance and evasion.

PWYP Indonesia calls for four key recommendations:

1. Overall improvement of tax system and state revenue transparency
2. Improvement of tax compliance, and a strengthening data integration
3. Synergising of regulation in taxation and mining
4. Law enforcement on tax evasion and tax avoidance cases.

Access the full report by clicking here.