Creating Enabling Regulation
for Indonesia Philanthropy
Hamid Abidin
Association of Philanthropy Indonesia
Philanthropy and Tax Regulation in Indonesia
• Philanthropy in Indonesia is growing rapidly in the last 15 years
driven by the freedom of association, the economic crisis and
natural disaster
• The development of philanthropy is not supported by the
provision of a conducive legal environment, particularly tax
incentives.
• Indonesian Tax laws do not recognize the principles of nonprofit
organisations as organisations exempted from corporate revenue
taxes .
• Tax incentive policy in general is unclear and largely implemented
on an ad hoc basis within the framework of disaster management
• In the 1980s tax law provided tax exemption incentives, but did
not impose tax deduction incentive for donors
• In 1994 government terminated tax exemption because there had
been abused in practiced
• in 2000 the government provided tax deductions for individuals
who give donations in the form of zakat (alms)
• This policy is considered discriminatory because only acquired by
the moslem taxpayer
Background of Advocacy
• On 31 August 2005 the government planned to
reform the tax law proposed five Bills on Taxation to
the parliament (DPR).
• Some NGOs, corporate foundations, family
foundations and corporations recognised the tax
reform as an opportunity to propose tax incentives for
philanthropy and non profit sector
• They met and agreed to form coalition with the name
“Indonesia Society Supporting Tax Incentive" and
pointed to Association of Philanthropy Indonesia
(PFI) to be the coordinator and managing coalitions
• Coalition members then met to discuss the stages of
advocacy, determine job discription, and mobilized
supports and resources to strengthen coalition
agendas
Coalition Members
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PFI (NGO)
Kehati Foundation (NGO)
PIRAC (NGO)
LP3ES (NGO)
Yappika (NGO)
PSHK (NGO)
TII (NGO)
YMM (NGO)
Tifa Foundation (NGO)
IFFPR (NGO)
Sampoerna Foundation (Corporate Foundation)
IBL (Corporate Foundation)
CFCD (Corporate Foundation)
Ogilvy Public Relation Worldwide (Corporate)
PT Bogasari Sukses Makmur (Corporate)
Metro TV (corporate/ media)
Budget Limitation: The Challenge
• Public, corporate, and philanthropic organization has not
been provided support on advocacy activities
• International donors generally supported advocacy
programs was not interested in the issue of taxation
• The advocacy was expected to last longer (3 years) and
required consistency, strong commitment and large
amount of resources
• The coalition tried to overcome the challenge by identified
the stakeholders who have an interest in this law and
mapped some alternative supports and resources
• They mobilized supports and resources in the form of
inkind (meeting places, meeting consumption, experts for
research and legal drafting, the draft of the campaign,
etc.)
• To minimize operating costs, all coalition members are
committed to working in a voluntary scheems
Working Group Job description
• Drafting Team: (PIRAC, PSHK, LP3ES, MUC)
– Conducting research and preparing working paper about the tax
bill
– Formulating draft counter / alternative
– Presenting the results of studies/ draft counter in various forums
• Campaign Team: (Ogilvy PR, Tifa Foundation, Sampoerna
Foundation, Bogasari, YMM, metro TV)
– Packaging and distributing the information in the form of fact
sheets, press releases, brochures, public services ads., etc
– Asking individuals / experts to speak and write their responses and
opinions about the tax bill draft in the medias
– visit to the media and hold press conference
– Conducting seminars, workshops, talk shows and invited the
media to cover them
• Lobby Team: (Kehati, IBL, TII, Yappika, IFPPR)
– Mapping & Targeting lobby: Parliamentarian, government officials,
boards of Foundations, other stakeholders affected by tax bill
– Conducting formal and informal meeting to discuss the tax bill draft
– Aproaching the public figures to convey the coalition proposals
The Coalition Proposal
• Creating Definitions About non-profit organizations
and tax exempt non-profit organization in the tax
law draft. This definition is not listed in the
previous tax regulations
• Added New Articles About Tax Incentives and the
procedures. These not regulated in the Tax Law
draft
• Extending the tax exemption incentives to active
and passive income generated by non-profit
organization
• Added New Article About Tax Deductions
incentives For individual and institutional Donors
• Added explanation on the scope of programs/
issues catagorized as tax deductable income
Advocacy Result: Tax Law No.26/ 2008
• The Tax law provide tax exemption for:
– donation in general
– zakat (alms) that distributed in Zakat Institution established or
othorized by government
– Income generated by social institution handling education and RD
(research and development) programs
• The tax law provides tax deduction only for donation in the fields of:
– National Disaster
– Education
– Research and development
– Social infrastructures
– Sport
• The next Agendas: Procedure and Mecanisme
The government has not determined the procedures and mechanisms
in obtaining tax incentives. These provisions will be stipulated in other
government regulation
Lesson Learned
– Strengths:
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Solid team
Not recognized as international donor agenda
Work processes are transparent
Solidarity among the core group
Strong coordination
Involving many parties (NGOs, Corporate & Universities)
– Weaknesses:
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Unsignificant Public support
Too academic position paper
The team performance was not optimal and slow lobbying
Campaign and lobby team less synergistic
Jakarta centric: not involve stakeholders in other provinces
Media did not see tax incentives as major/ priority issue
Parliamentarian did not recognized the urgency of tax
incentives.