February 26, 2024

Indonesia Reports Significant Crypto Tax Revenue Drop, Faces Challenges Amid Market Growth

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Indonesia’s Ministry of Finance has disclosed that the country’s total tax revenue from cryptocurrency transactions in 2023 amounted to $31.7 million (Indonesian Rupiah 467.27 billion). However, this figure represents a significant decline of 62% compared to the partial collection period in 2022 when the crypto tax regime was introduced in May.

Crypto transactions in Indonesia are subject to dual taxation, involving a 0.1% income tax and a 0.11% value-added tax (VAT). In addition, local crypto exchanges are required to contribute approximately 0.04% tax to the national crypto bourse. Despite the remarkable 159% increase in bitcoin (BTC) value during 2023, Indonesia experienced a downturn in crypto tax revenue, coinciding with a 51% decrease in the country’s overall crypto transaction volumes compared to the previous year.

Local exchanges in Indonesia have expressed dissatisfaction with the high tax rates, attributing them to thinner revenues as users seek alternative platforms. These exchanges propose that crypto transactions should only be subject to income tax, eliminating VAT. This recommendation aligns with the impending regulation by Indonesia’s Financial Services Authority (OJK), scheduled to take effect from January 2025, with the goal of categorizing crypto more as a security than a commodity.

Notably, last month, the prominent Indonesian exchange INDODAX highlighted that the total taxes on crypto transactions in the country often surpass the trading fees. This has raised concerns about users potentially turning to overseas or illegal exchanges for more cost-effective transactions.

Meanwhile, the global adoption of cryptocurrencies reached new milestones in 2023, with an estimated increase of 34% in the number of cryptocurrency users worldwide from approximately 430 millions to well over 560 million users. The growth occurred despite macroeconomic challenges, including monetary tightening by Western central banks, conflicts in Europe and the Middle East, and ongoing pandemic-related repercussions.

In a related development, the HyperVerse cryptocurrency scheme, which targeted investors in developing countries across Asia, Africa, and the Pacific, collapsed, leaving many unable to access funds. The scheme, linked to an earlier initiative called HyperFund, was launched by Australian blockchain entrepreneurs Sam Lee and Ryan Xu, founders of the now-collapsed company BlockChain Global. The expansion of the HyperVerse scheme to untapped markets, including developing countries, led to warnings from regulatory authorities, such as the Central Bank of Nepal, cautioning against the enticement of individuals with promises of high returns in a short period through cryptocurrency products.

Digital Assets Desk

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