Indonesia's decision to curb tax evasion by tracking credit card transactions is backfiring. The move is making its citizens to move even more towards cash, hindering the government's efforts to keep a surveillance on money laundering and corruption.
The government's recent order that mandates credit card providers to furnish details of customer and merchant establishments to the country's income tax office by Tuesday (May 31) led to a four percent fall in credit card transaction values for April on a year-on-year basis, the first in six years, according to a Reuters report.
In terms of absolute transactions, they stood at 23.7 million in April, down 2 million on a sequential basis. Card transactions account for about 15 percent of overall transactions in the country.
The agency said that the government's move that has forced people to resort to cash transactions is neither helping in increasing tax revenues nor aiding the government's efforts to target illicit money flows in the country's economy.
"People don't want to risk swiping credit cards for booking fees," Erwin Karya, a Jakarta-based associate director with real estate agent Ray White, told the agency.
The government should reverse its decision, suggested the head of the country's credit cards issuers' body. "People should be incentivized to use cards, not penalized," Steve Martha, chairman of Indonesian Credit Card Association (AKKI), told Reuters.
Indonesians have 16.9 million credit cards issued by 22 banks and one non-bank issuer.
The Jakarta Globe said the number of credit card users in Indonesia as of September 2015 stood at eight million customers with 15.8 million cards.
Reuters reported that a tenth of 250 million Indonesians are registered with income tax authorities and they pay $30 billion less than what they should be paying, quoting the country's president Joko Widodo.