Page 3 - Working Paper (The Myths and Realities of Tax Performance Under Semi-Autonomous Revenue Authorities)
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DDTC Working Paper 0213

                   “IT  IS  InTeReSTIng  To  noTe  how  MAny  of

                   The  gReAT  ScIenTIfIc  dIScoveRIeS  begIn  AS


                   -Rollo May, The CRy foR MyTh, 1992

                   1. Introduction                                  performance  of the SARA model of taxation. Thus, it
                                                                    is norma to have pros and cons regarding the role of
                      During  the  last  4  months,  discussions  over   institutions, especially the SARA model of taxation
                   factors related to institutional capacity and models   for performance improvement. This  article  seeks
                   of tax  administration often more took place  in   to fill this gap, by analyzing differences in taxation
                   many occasions  in Indonesia. There is  a strong   situation and the impact on the performance of the
                   desire or at least a great curiosity about: what if   SARA model of taxation, particularly in an effort to
                   the tax authorities in Indonesia are given greater   improve revenue collection. In addition, this article
                   authority  so as  to become more autonomous? In   also explores main factors behind the decision to
                   other  words,    what  if  the  Directorate  General  of   implement SARA.
                   Taxes  is  separated  from  the  Ministry  of  Finance
                   and becomes an independent institution?          2. Why SARA needs to be Considered?
                      Currently,  model  of  tax  authorities  under  the
                                                                       From the scientific perspective of public policy,
                   Ministry  of  Finance  around  the  world  is  slowly
                                                                    management, and economics, institutional aspects
                   being abandoned. There are growing trends  of
                                                                    are considered as the framework  that  govern
                   separation  of the tax  administration  from the
                                                                    the  functions or interactions  among  players.
                   Ministry  of  Finance,  especially  in  the  last  two
                                                                    Furthermore,   institutions   provide   guidance
                   decades.  Many  countries  have  established  more
                                                                    that  ensure each  agency works  optimally and
                   autonomous  tax  institution  known  as  Semi-
                                                                    not deviate  from  the established  corridor. Thus,
                   Autonomous  Revenue  Authority,  hereinafter
                                                                    it is not surprising that  tax  reforms  in various
                   referred to as SARA.  The main justification of this
                                                                    countries  include seeking the ideal form  of  tax
                   phenomenon departs from the needs  to collect
                                                                    institution. Over this fact, radical changes into the
                   sustainable  revenue, better  services,  as well  as
                                                                    tax  authorities suggested  including  making  the
                   improvement of governance in tax sector.
                                                                    tax authorities into a more autonomous institution
                      However,  the idea is not  without  criticism.    which runs like a private company.
                   Some relevant parties see the weak performance
                                                                       SARA is a term that refers to the institutional
                   of tax collection in Indonesia is not solely caused
                                                                    framework and governance for  organizations
                   by institutional  factors.  Thus,  they suggest that
                                                                    involved  in the collection administration, where
                   redesign of tax administration or transformation to
                                                                    the framework is to provide  a greater  autonomy
                   a model of SARA is not necessary. In addition, there
                                                                    than  regular  departments  or directorates under
                   might  be  potential  costs that  might  have arisen
                                                                    the  Ministry.  Basically, the word “autonomous”
                   due to this institutional  redesign which  is  not
                                                                    can  be  interpreted as independence  or self-
                   necessarily improve the performance of taxation.
                                                                    government. In the context of public administration,
                      The debate among academics about whether or   autonomous generally refers to the extent to which
                   not the SARA model should be adopted has been    a  government  agency is capable  of operating
                   taking place for quite some time. Many literatures   independently covering several  aspects such as
                   provides  evidence  of  success  and weakness  of   funding and budgeting, finance, human resources,
                   SARA  model  in  various  countries.  Unfortunately,   and administrative aspects.  As an autonomous
                   there are very limited empirical study to date on the
                                                                    4 See Rosario G. Manasan, “Tax Administration  Reform: (Semi-)
                                                                    Autonomous Revenue Authority Anyone?” Discussion Paper Series No.
                   2  Based  on  our observation,  the  first  article that  provides complete   2003-05, Philippine Institute for Development Studies, 4.
                   institutional  analysis about tax authority in Indonesia was provided   5  As  mentioned by  William  Crandall dan  Maureen  Kidd,  “Revenue
                   by Darussalam, B. Bawono Kristiaji, and Hiyashinta Klise, “Desain   Administration:  Autonomy in Tax Administration  and the Revenue
                   Kelembagaan Administrasi Perpajakan: Perlukah Ditjen Pajak Terpisah   Authority,” IMF Technical Notes and Manuals, (2010). … is simply a
                   dari Kementerian Keuangan“ Inside Tax Edisi 16 (Juli-Agustus, 2013):   term to describe  a governance regime for an organization engaged in
                   6 – 15, 62 - 65. Although, ideas and opinions about the prospect in   revenue administration that provides for more autonomy than that
                   Indonesia not new.                               afforded a normal directorate in an ministry.”
                   3 Previous literature named this term as Revenue Authority Model  or   6 William Crandall, “Revenue Administration:  Autonomy  in Tax
                   Unified Semi-Autonomous Revenue Bodies.          Administration and the Revenue Authority Model,” IMF Technical Notes
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