Estimating Tax Potential from Indonesian Political Contributions Under the Assumption of Unverified Fund Origins

Abstract

Political contributions may contain hidden tax potential, but this issue remains largely unexplored in Indonesia. This study examines reports of campaign fund contributions from the 2019 Indonesian General Elections, highlighting their value as a database for identifying unreported taxes. Using a mixed-method approach, the research combines quantitative data from campaign finance reports published by the Indonesian Election Supervisory Agency and qualitative insights from previous research related to the correlation between political contribution to tax evasion. The findings reveal a significant gap in tax reporting, suggesting that the Directorate General of Taxes could collect substantial unpaid taxes from individuals and corporations who make political donations.  This study emphasizes the need for stricter oversight by the Indonesian Election Supervisory Agency to ensure the accuracy of campaign finance reports. It also highlights the importance of collaboration between the Indonesian Election Supervisory Agency (BAWASLU) and the Directorate General of Taxes to optimize tax collection efforts. By utilizing campaign finance data, policymakers can strengthen tax enforcement and improve financial transparency in political contributions.  Based on the simulation of maximum contribution limits during the 2019 elections, there is a large gap between reported contributions and actual campaign spending, with a simulated potential tax revenue amount of up to 6.25 billion rupiah per taxpayer who makes the contribution, assuming that the origin of funds comes from unreported income.