Consequences for a Company That Fails to Pay Taxes

Tax compliance has become the primary obligation of every company in Indonesia. The Directorate General of Taxes (DJP) has established clear rules and deadlines for tax reporting and tax payments. However, quite a few companies are negligent or even deliberately delay that obligation. The question is, what happens if a company does not pay taxes beyond the maximum limit set by the DJP?

This case is not merely a matter of administration. The impact of tax delinquency can lead to significant financial losses and even criminal liability. Through tax law enforcement, the government strives to maintain taxpayer compliance while also protecting state revenue.

Administrative penalties that must be borne

When a company misses the tax payment deadline, administrative sanctions are immediately imposed. This form of sanction consists of a fixed fine and late payment interest.

Late fee

The amount of the fine varies depending on the type of report. For late filing of the VAT return for the period, the penalty imposed is Rp100,000. Meanwhile, for the Corporate Annual Tax Return, the penalty amounts to Rp1,000,000. The individual annual tax return is subject to a Rp500,000 penalty.

Late payment interest

In addition to fines, the company is also charged administrative interest. The amount refers to the Ministry of Finance's benchmark interest rate, generally around 2 percent per month, and is calculated from the due date until payment is made. The longer you delay, the higher the amount of interest you have to pay.

Tax Collection Process by DJP

If the company fails to settle its obligations after penalties and interest have been imposed, the Directorate General of Taxes has the authority to carry out active collection. This process is carried out through the stages of issuing official letters.

Tax Billing Letter (STP) and Tax Assessment Letter (SKP)

STP is usually issued at the start of billing. If the obligation is not fulfilled, the Directorate General of Taxes may issue an SKP that determines the amount of tax payable, including its penalties.

Writ of Execution and Seizure

In extreme conditions, the Directorate General of Taxes is entitled to issue a Writ of Execution. This letter provides the legal basis for seizing the company's assets. Bank accounts, vehicles, and even properties can be seized to cover unpaid tax liabilities.

Criminal Risk for Companies

When a delay is not merely negligence but intentional, the risk of criminal liability lurks. The General Provisions and Tax Procedures Law (KUP) states that acts of tax evasion can be punished with imprisonment for a minimum of six months up to six years. In addition, a company may be fined two to four times the amount of unpaid tax.

The government emphasizes that this crackdown is not merely to punish, but also to provide a deterrent effect. As stated by a DJP official on several occasions, "Tax compliance is the key to the sustainability of state revenue. Without compliance, development will be disrupted."

Impact on Reputation and Business

In addition to the risks of fines, interest, and criminal penalties, the company also faces reputational damage. Companies that are in tax arrears can be added to the DJP blacklist. This hampers access to fiscal incentives, makes it harder to participate in government project tenders, and even affects banks' confidence when applying for credit.

Investors also tend to be hesitant to invest capital in companies that have problems with tax compliance. This negative reputation can affect relationships with business partners and lower the company's value in the market.

Prevention and Solutions

To avoid getting into serious trouble, the company is required to implement a disciplined tax compliance system. Some preventive steps that can be taken include:

• Create an internal tax payment schedule with automatic reminders.
• Utilizing tax consultant services to ensure compliance.
• Using an integrated digital accounting and tax application.
• Carry out periodic internal audits so that no obligations are overlooked.

If the company has already fallen behind on payments, the best course of action is to make the payment immediately. DJP also provides installment arrangements or payment deferrals with certain procedures.

Law Enforcement and Transparency

The Directorate General of Taxes continues to improve the tax digitization system to prevent manipulation and tighten oversight. Through the core tax administration system program, all taxpayer data will be integrated, thereby the potential for tax avoidance can be curbed.

This effort is in line with Indonesia's commitment to increasing the tax ratio. The government targets higher tax revenues each year to support national development.

Conclusion

Not paying taxes beyond the DJP's maximum limit is not just a matter of fines. The consequences include compound interest, asset seizure, and even criminal liability. The company needs to realize that tax compliance is not merely a legal obligation, but also an investment in maintaining its reputation and the sustainability of the business.

Therefore, every company should start building a culture of compliance early on. In doing so, legal and financial risks can be avoided, and the company's image remains intact in the eyes of the public.

Also read the related article on Insimen about tax compliance strategies and the benefits of using a digital accounting system for modern companies.