The Government of Indonesia embarked on a comprehensive program of public financial management modernization and reform in the wake of the 1997 economic crisis.  One of the key areas of focus is tax administration, where inefficiencies and poor governance in the Directorate General of Taxation (DGT) are widely perceived to impede revenue generation and to adversely impact the investment climate.  Considerable efforts have therefore been made to accelerate the modernization of tax administration.  This has included the rollout of modernized offices, the restructuring of the Head Office and extensive individual reform efforts aimed at improving service capability, governance and revenue generation.

AusAID has supported these modernization efforts since 2004 through TAMF III and the DGT Tax Sub-Facility. Initially with an emphasis on high-level strategic planning assistance to underpin DGT’s Modernization program – including development of strategic and operational plans, assistance in the establishment of Transformation Unit responsible for internal direction on reform matters. From 2007 TAMF III directed support to tax revenue generation and governance. Assistance in 2009 saw a focus on activities that facilitated the measurement of performance and improvements in governance; the most notable being the outbound Call Centre.

In mid 2009 DGT initiated a new Modernization Program, which focused on the automation and enabling of processes, as well as people development. AIPEG is presently providing support in the areas of internal investigations, surveys on small tax payer offices, database analysis and legal prosecution (objection and appeals), all of which directly support the new modernization objectives.

AIPEG is also supporting DGT with capacity development in IT and HR as a precursor to the World Bank funded PINTAR Tax Program. In developing the AIPEG 2010/2011 program of activities, AIPEG has focused on the Strategic Plan of DGT 2008-2012 and identified areas that would serve both the DGT and AIPEG objectives. Thus AIPEG will assist with:

• Improved Taxpayer service through a new fresh approach to Communication and specifically Governance
• Tax Payer Compliance
• Human Resource development with a focus on HR Strategies and plans as well as legal capacity building
• Improved efficiencies and effectiveness through support in change management, business practices, and connectivity with other donor programs such as PINTAR.