Under-Invoicing Practices in Indonesia: A Threat to State Revenue and Market Health

The Issue at Hand

Recent reports have highlighted the ongoing prevalence of under-invoicing practices in Indonesia's import activities ¹

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Source 2

https://nasional.kontan.co.id/news/indef-soroti-praktik-under-invoicing-yang-rugikan-negara-puluhan-triliun

. This practice involves declaring lower transaction values than the actual prices of imported goods, resulting in significant losses to state revenue. The Institute for Development of Economics & Finance (Indef) and Center of Reform on Economic (CORE) Indonesia have brought attention to this issue, emphasizing its detrimental impact on both state finances and market competition.

Economic Implications

The under-invoicing practice not only deprives the state of potential revenue but also distorts market competition. By understating the value of imported goods, certain businesses gain an unfair advantage over competitors who comply with regulations. This unhealthy competition can lead to market inefficiencies and potentially harm domestic industries. Rizal Taufikurahman from Indef explained that this practice reduces the state's revenue base at the import stage because the declared value is much lower than the actual price ¹

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Expert Opinions and Recommendations

Yusuf Rendy Manilet from CORE Indonesia described under-invoicing as a structural problem that results in substantial revenue losses for the state and creates an uneven playing field for businesses ²

. He emphasized that the Ministry of Finance's recent focus on monitoring this practice indicates its persistence and significant scale. To address this issue, experts recommend that the government strengthen data integration between relevant agencies. This measure could help identify and prevent under-invoicing more effectively.

Government's Role

The government plays a crucial role in combating under-invoicing practices. By enhancing data sharing and integration between customs, tax authorities, and other relevant bodies, the government can better detect discrepancies in declared import values. This approach, coupled with stricter enforcement and monitoring, could mitigate the revenue losses and market distortions caused by under-invoicing.