Transforming Tax Administration in Indonesia through a Single Identity Number

In the ever-changing landscape of fiscal governance and revenue collection, governments around the world continually seek innovative approaches to streamline tax systems and enhance financial management. Indonesia is no exception and has been actively pursuing a wide-ranging program of reforms. As part of this program, the Indonesian government's long-planned introduction of a Single ID for taxation, integrating the National ID Number with the Tax Identification Number (TIN), was officially adopted in the Harmonization Taxation Law in 2022. The new arrangements are designed to transform tax administration.

A Tale of Two Identifiers

In Indonesia, the National ID comprises a unique 16-digit number. This ID is individual-specific, lifelong, and serves as fundamental data for public service administration. Additionally, for tax purposes, every citizen who registers and meets the criteria as a taxpayer is issued a 15-digit TIN. Both the National ID and TIN are valid IDs for government administration. However, the difference lies in their implementation. The National ID is obtained and registered from birth, while the TIN is acquired only when an individual registers as a taxpayer.

From a tax perspective, the application of multiple IDs for administrative purposes means that some individuals may not have registered for a TIN even though they meet the requirements as taxpayers. To address this issue, the government aims to integrate all data under a single portal known as the Single Identification Number (SIN), which will become the National ID. The SIN makes it possible for the government to process citizen data more efficiently, as it encompasses a wealth of information. This integration not only benefits the government but also directly benefits citizens, as they use their National ID as the single ID for accessing tax services.

Data Validation and Self-Update Mechanism

The use of the National ID as the TIN has been in effect since July 8, 2022^[1]. However, starting from January 1, 2024, the National ID will completely replace the TIN as the primary identity for individual taxpayers in Indonesia. This ID will be used for all tax-related activities, including registration in the tax system, filing tax returns, and accessing tax services.

The new arrangements only affect individual taxpayers who are residents. Taxpayers who had a TIN before July 8, 2022^[2] are required to validate their TIN and National ID data through an online self-updating mechanism until the end of December 2023. During this transition period, they will still be able to use their TIN for tax-related activities. Meanwhile, citizens who register as new taxpayers will use their National ID as their tax ID.

As of July 27, 2023, 57.9 million National IDs have been integrated as tax IDs, accounting for 82 percent of individual taxpayers^[3]. Taxpayers' participation will play a crucial role in the successful nationwide implementation of the single tax ID in the upcoming year. It is important to note that not all citizens with a National ID will automatically become taxpayers - this only applies to residents who meet the necessary criteria as taxpayers.

The Road to a Modern Tax Regime

The notion of a Single Tax ID offers several benefits to both taxpayers and tax authorities. From the taxpayers' perspective, it represents simplification and efficiency. Taxpayers no longer need to manage multiple identification numbers for different tax-related purposes, thus streamlining the tax process and reducing the administrative burden on both them and the government authorities. The new system also enhances the accuracy of taxpayers' data, minimizing errors, duplications, and discrepancies in tax records, and enabling the tax authorities to monitor tax-related activities more accurately. Moreover, a single tax ID offers convenience for taxpayers, enhancing voluntary compliance. From an enforcement perspective, a single tax ID will also support the authorities in detecting tax evasion and fraudulent activities.

The implementation of the national ID as the tax ID demonstrates the government’s commitment to tax reform. This unified identification system will transform tax administration and improve data accuracy, reducing bureaucratic barriers for taxpayers. As a result, tax compliance is expected to increase, leading to higher revenue collection and a fairer distribution of the tax burden. Furthermore, integrating the national ID into the tax system aligns with Indonesia's vision for comprehensive tax reform, promoting transparency, fairness, and efficiency in fiscal governance. This significant step towards a modern and inclusive tax regime sets the foundation for a stronger and more sustainable economic future.