Indonesia’s Online Pajak to eliminate companies’ tax headache

• Collected US$202.4 million in tax from 300,000 corporate taxpayers in 2016
• Aims to bring all taxpayers online and help the government with its tax collection target

WHEN it comes to paying taxes, we all know too well the headache we suffer every year from trying to organise all our paperwork to filling in the forms and queuing to file them. The whole process takes hours if not days to complete.

Some countries have an online system for individuals and companies to report their income and pay taxes, but in Indonesia, paying tax is still done manually.

The home of 250 million people, Indonesia has only about 30 million registered taxpayers from a total of 93.7 million registered working citizens according to data from the country’s Central Statistics Agency (BPS).

Of the 30 million registered tax payers, only about 63% pay their taxes and report their incomes, according to the country’s Ministry of Finance. According to the authorities the awareness of the taxation system in Indonesia is very low.

For Charles Guinot, director of PT Achilles Advanced System, the company behind OnlinePajak, one of the reasons why Indonesia has a very low tax compliance rate is simply because of the complicated process, and the absence of an integrated online system.

OnlinePajak provides an integrated platform that will help companies to prepare, pay, and file their tax online.

“Companies need to pay their taxes, prepare a report on why they are paying that amount, and bring it all manually to the Tax Office. With OnlinePajak, companies just need to sit and click through everything online, and the process will be taken care of,” Guinot said.

The Frenchman, who has been residing in Indonesia for five years, told Digital News Asia (DNA) that he experienced the painful process with his first endeavour, a trading company, where he needed to constantly talk to several accountants and tax consultants on how to ensure that his company complied with the tax processes and regulations.

“If you are a foreign entity operating in Indonesia, you want to make sure that you comply with the regulations, and doing so in reality, is not that simple. In fact, it is a very complicated process,” he said.

According to OnlinePajak’s internal survey, companies in Indonesia spend approximately 240 hours a year to complete the tax process.

“When you feel the pain, only then will you think of the solution. At that time, I was thinking about how to simplify the process with an online system which is integrated to the country’s tax office,” he added.

Starting solo, Guinot now has 35 people in the team. The company also has been appointed as the Tax Office’s official application service provider under a ministerial decree.

Individuals who only need to file and report their income tax can use the platform for free. For more sophisticated and large scale features such as invoice tax handling, integration with a company's accounting, and human resource department, and other tax solutions for small and medium enterprises, the platform charges premium fees.

By the end of 2016, OnlinePajak had collected Rp2.7 trillion (US$202.4 miillion) worth of tax money from 300,000 corporate taxpayers , including conglomerates Astra International, e-commerce player Tokopedia, local champion Go-Jek, and retailer Kawan Lama Group.

Guinot was also been selected as an Endeavor Entrepreneur in September last year's ear by the International Selection Panel in Boston, the United States.

Integrating with officials

Since day one, Guinot (pic, right) knew that his journey with OnlinePajak would not be a smooth one without the ability to work together with the country’s Tax Office.

“Why? Because tax is a very sensitive issue. The success of the platform, like it or not, depended on my ability to get the tax office on board to share the same vision,

 “It worked well. OnlinePajak is seen as a platform that can help the tax office to collect more money without focusing too much of the technology side,” he explained.

He said that it took him a solid one and a half years to try to integrate OnlinePajak’s system with the Tax Office’s system. It was painful and long, but it was the right way, if not, the only way to start. OnlinePajak was finally fully integrated with the Tax Office in July 2015, hence marking the official launch of the platform.

 “The first day I came to the Tax Office, I told the security that I wanted to meet someone who handles partnerships. Three people stopped me and asked me to make an appointment first. I left, and came back three days in a row, and finally they let me in, and brought me to meet the right person,

 “From there, I navigated my way through every single door in the Tax Office, asked questions on how I can help with their main task of collecting more tax money with technology. I asked what the most difficult challenges were,” he said, half laughing as he recalled how the employees at the Tax Office would refer to him as ‘Bule gila’ or ‘crazy foreigner’ in English, simply because he spent most of his time wandering around the Tax Office.

But his idea was widely welcomed by the Tax Office simply because the office needed the technology expertise. Looking back, he said that crawling his way through the Tax Office, listening to their challengers, and trying to gain their trust, were all key to the success of OnlinePajak.

 “Now, I know half of the directors in the Tax Office. We have a WhatsApp group and constantly chat about improving the platform. Now we meet a few times every week, and it is very important to foster the relationship,” he said.

Future plans

Once seen as a very painful and complicated process, Guinot wants to change companies’ perspective about taxation.

 “For example, without an integrated online platform, if a company forgets one invoice and wants to revise its tax returns, they do not need to go through the whole process manually and queue at the Tax Office. Now if you want to do revisions, it will not be a big deal as it will take you only five minutes via our platform,” he said.

Simplifying the whole process according to Guinot can increase compliance, and help grow the number of taxpayers at the same time. Why? Because it is very easy to prepare, pay, and report.

“In this way, companies will never be late in their tax processes, tax collection will be more accurate, and more people will be reporting and paying their taxes,” he added.

The company currently adds 2,500 taxpayers every month, and is looking to add 10,000 taxpayers every month by the end of first quarter 2018.

The company also wants to support the government’s tax collecting effort by targeting to collect Rp15 trillion (US$1.1 billion) by the end of 2017, or about 1% of the Indonesian government’s tax collection target of Rp1,500 trillion (US$112.4 billion).

Besides all the numbers, Guinot is also targeting for OnlinePajak to reach its sustainability balance this year, where there will no longer be a need for him to pour money into the company.

Since mid-2015, Guinot has been the sole investor in OnlinePajak. He is hoping that this year he can score a Series A or Series B investment round, mainly to help him hire more experienced people, and expand the growth of OnlinePajak.

“Ideally it will take OnlinePajak about 10 years to be able to bring every taxpayer in Indonesia online. During the next five years we will focus on bringing in more companies, and for the next five years we need to look at every individual and lead them to paying their taxes online,” he said.

He admitted that while the company can and should go faster, there are other factors such as geographical conditions and network readiness that should be taken into account to get everyone on board with the online tax process.

“Once we get closer to our vision, we would like to look at other verticals as well such as healthcare,” he concluded.

[Article edited for accuracy]

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