Indonesia Witnesses Sharp Decline in Crypto Tax Revenue Amidst Bitcoin Rally

Indonesia Witnesses Sharp Decline in Crypto Tax Revenue Amidst Bitcoin Rally

Despite a significant surge in Bitcoin value in 2023, Indonesia’s cryptocurrency tax revenue experienced a substantial decrease, according to the country’s Ministry of Finance. The total tax revenue collected from cryptocurrency transactions in 2023 amounted to $31.7 million (Indonesian Rupiah 467.27 billion), marking a 62% drop from the previous year. This decline occurred even though Bitcoin’s value soared by 159% over the same period.

The Indonesian government imposes a dual taxation system on crypto transactions, consisting of a 0.1% income tax and a 0.11% value-added tax (VAT). Furthermore, local cryptocurrency exchanges are required to contribute approximately 0.04% tax to the national crypto bourse. The downturn in tax revenue coincides with a 51% reduction in the volume of crypto transactions within the country, compared to 2022.

Local exchanges have voiced concerns over the high tax rates, attributing them to decreased revenues as traders seek more cost-effective alternatives. The exchanges have proposed that cryptocurrency transactions should be subject only to income tax, eliminating VAT. This suggestion comes as Indonesia’s Financial Services Authority (OJK) is set to regulate cryptocurrencies starting January 2025, potentially classifying them more akin to securities rather than commodities.

The high tax burden on crypto transactions, often surpassing trading fees, has raised concerns about traders migrating to foreign or unauthorized exchanges to evade higher costs. The Blockchain Association of Indonesia reported the presence of 303 illegal exchanges operating in the country as of May 2023, posing a significant challenge to the formal tax system.

    Newsletter | Every weekday

    Smart Central News Weekly Briefing

    Only top industry news of the week in your inbox