Jakarta – Meliana Lumbantoruan, Deputy Coordinator of Publish What You Pay (PWYP) Indonesia, was present as one of the responders at a public discussion entitled “Illicit Financial Flows in the Fisheries and Coal Sectors in Indonesia” organized by Prakarsa on January 31, 2023. Other speakers at this discussion included Denny Vissaro, DDTC, Representative of the Directorate General of Taxes of the Indonesian Ministry of Finance. Also, Civil society organizations, academics, and business associations, as participants.
This public discussion was motivated by a shared commitment to combat illicit financial flows, which has also become a global commitment and is listed in the Sustainable Development Goals (SDGs). Illicit financial practices occur in various modes, such as money laundering, tax avoidance, transnational bribery, and tax evasion. This discussion also disseminates the results of research conducted by Prakarsa conducted in 2022. This research focuses on illicit financial flows in the fisheries and coal sectors. In another study, Prakarsa shows the enormous potential loss of state revenue from coal worth 5.32 billion USD and the possible loss of tax revenue, which increased from 26.8 thousand USD in 1989 to 897.8 thousand USD in 2017 (Prakarsa, 2019).
Prakarsa’s research in 2022 revealed an illicit value of 133.5 billion USD in the coal sector over the past ten years. There is an illicit value of 133.5 billion USD. According to Meliana’s response, this occurred due to export under-invoicing because the state lost revenue from royalties and PPH. In detail, lost income from royalties amounted to 3.8 billion USD and 1.16 billion USD from PPH (1.5%). It was highlighting the same thing. Under-invoicing occurs in Indonesia and India, while over-invoicing occurs in South Korea (Prakarsa, 2022).
Responding to the findings of this research, Meliana said the potential for miss invoicing, either under-invoicing or over-invoicing, especially in the extractive industry sector, is very high. Observing the trend in 2021-2022, coal production and exports are increasing, so there is also the possibility of potential recording errors in the process. Meliana also said that the domestic coal supply in that year could have been more optimal, where the amount of production and exports increased unbalanced by domestic coal supply. It could be a factor in the occurrence of illicit financial flows.
Meliana shared the efforts that should be made to combat illicit financial flows in the future. Through transparency and integration of production data on a national scale. It has begun to be done by the Government of Indonesia through the support of the National Strategy for Corruption Prevention (Stranas PK) initiative and also the involvement of civil society, including PWYP Indonesia, to strive for the process of transparency of export and import data in the form of a node data system that begins to carry out the latest data accuracy for supervision in the food and health sectors.
“For the fisheries sector, it can be included in the food sector so that in the future, the integration of production data and fisheries sector records can enter the node data system initiated by the government. Then for the extractive sector, it can be included in the category of critical commodities or others,” said Meliana.
Meliana said that the potential loss of tax revenue is likely due to regulatory inconsistencies and regulatory loopholes that are utilized, such as those listed in the National Energy General Plan (RUEN), where the government states that it will limit coal production. However, coal production is still increasing due to high global market demand. Another thing also often happens in licensing; until 2022, many changes still increase the potential for illicit financial flows. PWYP Indonesia also participated in efforts to transparency Beneficial Ownership data to reduce the potential for corruption in money laundering. Opening BO Data, and consistency of regulations, can optimize state revenue and reduce the gap in illicit financial flows.