Govt Struggles to Meet Asset Repatriation Target in Tax Amnesty Program's Second Stage
Jakarta. The government struggled to meet its target of Rp 1,000 trillion ($74 billion) in repatriated assets in the second stage of its tax amnesty program from October to December.
The good news is that it managed to exceed its target of Rp 4,000 trillion in newly reported assets.
According to data from the finance ministry's tax directorate general, taxpayers had declared Rp 4,295.9 trillion in previously unreported wealth and pledge to repatriate up to Rp 140.5 trillion in undeclared overseas assets by the Dec. 31 deadline.
The administration of President Joko "Jokowi" Widodo had wanted to add at least Rp 165 trillion in additional tax revenue from the tax amnesty program to the state coffer.
The tax amnesty program is up on the government's priority list as the tax office struggled last year with a low taxation revenue as local companies suffered from weak earnings caused by a global economic slowdown and ended up paying much less tax.
The final stage of the tax amnesty program started on Sunday (01/01) and will end on March 31.
Finance Minister Sri Mulyani Indrawati said on Saturday not many people had signed up for the tax amnesty program in the second stage since most of the major taxpayers had already joined in during the first stage in July-September — which offered the cheapest penalty and registered Rp 3,539 trillion in previously unreported assets, or nearly 90 percent of the government's target.
The results from the first stage are considered of utmost importance since the data collected during the period could be used to expand the tax base.
"We have identified you"
The popular Sri Mulyani made an impromptu visit to the tax directorate headquarters on New Year's Eve to say happy new year to tax officers who were manning the Tax Amnesty booths until midnight.
The minister said many professionals and medium-sized business owners had joined the tax amnesty program in the second stage.
Sri Mulyani said the ministry "has identified" professionals with undeclared assets and wealth and if they fail to sign up for the tax amnesty program, the ministry will approach the business associations in which they are affiliated with to reveal their names.
Notaries, doctors, tax consultants, lawyers, architects, accountants, governors and executives at state-owned companies who earn decent money from their job and may have undeclared assets have been the main target of the program in its second stage.
"We're hoping to see more people sign up in the third part of the program," Sri Mulyani said.
More than 612,000 taxpayers have already joined the tax amnesty program so far. The tax office's database said there are 32 million registered taxpayers, of which 20 million are still to report their annual tax returns and 12 million have not paid their income taxes.
Sri Mulyani said the tax directorate will remind taxpayers targeted by the tax amnesty program via email.
She said many commissioners and directors at state-owned companies have been identified with potential unreported assets and "are encouraged to participate in the program," otherwise they will see their tax return documents scrutinized next year.
The minister said the tax office is aware that some taxpayers have hidden assets. These people will receive a warning via email that they will face hefty penalties if they keep their assets and wealth undeclared.
Shady tax consultants
Sri Mulyani also said the ministry will not spare shady tax consultants if they are involved in tax evasions.
According to data from the directorate general of general law administration at the Justice and Human Rights Minister, there are 14,686 registered notaries, but only 11,314 of them have tax identification numbers.
Only 3,186 notaries have participated in the tax amnesty program as of October.
Indonesia also has 106,495 registered doctors but only 23,310 have tax identification numbers and so far only 2,172 doctors have joined the tax amnesty program.
The tax office has organized a number of seminars to encourage these professionals to sign up with the tax amnesty program, but the result has been poor.
The tax office's special dashboard showed as of Sunday that around Rp 107 trillion has been collected from the tax amnesty program so far, which included discounted fines and taxes paid in arrears. The money will go straight into the state coffer.
Improvement needed in investment climate
Yustinus Prastowo, the executive director of local policy think-tank Center for Indonesian Taxation Analysis, said the asset repatriation number could be low, but that does not necessarily mean that the tax amnesty program is unsuccessful.
He said one reason for the low asset repatriation figure is that Indonesia still needs to improve its investment climate.
Yustinus noted that Indonesia's portfolio of investment products are not as diversified as those offered by other countries, including its neighboring rival Singapore.
The city-state is known as the financial hub of Southeast Asia and is home to many local arms of global financial companies, including Citigroup, JP Morgan Chase & Co, Credit Suisse, Deutsche Bank and DBS Bank, and thus it offers a more diversified financial products.
The most important consideration for investors before they decide to repatriate their assets to Indonesia, according to Yustinus, is they want to make sure the investment climate in the country is at least encouraging.
But, he said, recent demonstrations, bomb threats and political turbulence have instead added to the country's risk profile and lowered investors' mood to invest in Indonesia.
Tags: Keywords: