- Indonesian cryptocurrency tax revenues drop 63% in 2023, despite 159% Bitcoin increase.
- High taxes drive users to foreign platforms, exchange houses propose to eliminate VAT on crypto transactions.
Indonesia faces a dilemma in its cryptocurrency market. Despite Bitcoin registering a 159% increase in 2023, the country’s tax revenue from cryptocurrencies declined by 63%. This contrast draws attention and begs for detailed analysis.
In 2022, the country implemented a specific tax regime for cryptocurrencies. However, in 2023, tax revenues fell to $31.7 million, a 62% drop compared to the previous year. This decline is remarkable, especially when considering the tax structure in Indonesia.
Crypto transactions face double taxation: 0.1% as income tax and 0.11% VAT. In addition, local exchange houses must contribute 0.04% of their transactions to the domestic crypto market. These fees, in theory, should generate significant revenues for the state.
However, the volume of crypto transactions in Indonesia decreased by 51% in 2023 compared to 2022. Market operators indicate that high taxes reduce their revenues and push users to look for cheaper alternatives.
Exchange houses, such as INDODAX, point out that taxes often exceed transaction fees, which could incentivize users to migrate to foreign or even illegal platforms.
In response, the exchange houses are proposing that crypto transactions only be subject to income tax, eliminating VAT. This proposal comes as Indonesia’s Financial Services Authority (OJK) prepares to implement cryptocurrency regulation in January 2025. The idea is to align the taxation of cryptocurrencies with their market nature, possibly redefining them more as securities than commodities.
This case in Indonesia underscores a global challenge. Governments must strike a balance between generating tax revenue and supporting the growth of cryptocurrency markets. Inadequate tax regulation can lead to a decline in local market activities and capital flight to more favorable jurisdictions. Indonesia’s situation serves as a reminder of the need for policies that understand and adapt to the fluctuating cryptocurrency sector.
