In the past couple of weeks, banks have questioned the policy that is aimed at detecting recalcitrant individual taxpayers, complaining that it is being implemented at the expense of the industry’s growth.

The authority was stipulated in a recent regulation issued by the Finance Ministry in March and is to take full effect starting on May 31.

With the regulation, the ministry’s directorate general of taxation will have the authority to peep into the transaction data held by 23 lenders to find mismatches between taxpayer spending behavior and the income reports they submitted to the tax office.

Red flags will go up on card holders who are deemed to be spending more than their monthly incomes allow, to an extreme degree, indicating that they may have other income that has not been reported.

Director general of taxation Ken Dwijugiasteadi said on Friday that the closure of credit card accounts was a temporary reaction as many recalcitrant taxpayers were intending to wipe out their financial records.

“They [the taxpayers] will open up new accounts again. They shut the old ones in order to prevent us from tracing their past transactions,” he said.

“I don’t think the regulation will severely impact the industry,” Ken added.

Bank Central Asia (BCA), the country’s largest credit card issuer, had seen a threefold rise in card account closures since the regulation was introduced, president director Jahja Setiaatmadja recently said.

State-run Bank Negara Indonesia (BNI), among the top five issuers, has similarly suffered from the increase in closures.

The bank’s credit card business division head, Corina Leyla Karnalies, said the lender had experienced a twofold increase in closures by holders of certain segments so far this month.

“We hope that this is just a temporary reaction and that the situation can recover,” Corina said.

She said that BNI had not specifically informed its customers about the regulation, but its call center was open to such questions in order to clarify their concerns.

Under the regulation, all institutions and associations are required to submit monthly reports on credit card transactions to the tax office.

The reports will include the holders’ IDs, merchants, details of transactions, card limits and monthly bills, to name a few.

Indonesia Credit Card Association (AKKI) general manager Steve Marta said many banks had reported that more and more credit card holders had closed their accounts, while others had also requested a decrease of their credit ceilings, since the regulation was issued.

Steve said the government must inform the public about the new regulation, which could trigger holders to panic if they are without thorough information.

Bank Mega’s managing director of cards and loans Dodit Wiweko said that while the increase in closures might also be attributed to the economic slowdown, the bank had attempted to anticipate the problem by informing and educating their customers of the new tax regulation.

“We’ve given information and education to our clients so that they thoroughly understand this regulation,” Dodit said, adding that card closures at the bank had surged by up to 8 percent.

As of last year, there were 16.86 million credit card holders in Indonesia with accumulated transactions reaching Rp 273 trillion (US$20.2 billion).

Finance Minister Bambang Brodjonegoro previously said he aimed to double revenue from individual taxpayers this year to Rp 18 trillion, a mere 1 percent of the overall tax revenue target of Rp 1.36 quadrillion.

There are only 27 million registered taxpayers in the country’s 250 million population.

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