Indonesia's Tax Amnesty Shows Slow Progress in First Month

A screenshot from tax office website showing collection under tax amnesty program on Aug, 18, 2016. A legal challenge to the amnesty, filed at Indonesia's Constitutional Court by activists last month, has made some people reluctant to join the program, fearing it might be scrapped, an economist said. (JG Screengrab)

By : Gayatri Suroyo | on 3:55 PM August 18, 2016
Category : Business, Economy

Jakarta. One month after getting launched, Indonesia's tax amnesty program has brought in only a tiny fraction of the billions of dollars the government hopes will go into state coffers, a development that worries some economists.

The government's target for the program, which offers low rates for taxpayers declaring previously unreported wealth, is collection of Rp 165 trillion ($12 billion) of revenue by the end of December.

In addition, the government hopes that more than $70 billion of assets overseas will return home under the amnesty.

The amnesty lasts only until March, but people joining it pay the lowest rates if they enter by Sept. 30.

As of Thursday afternoon, according to the finance ministry, revenue from the amnesty was Rp 679 billion, or just 0.4 percent of the program target.

The ministry said 5,613 taxpayers had declared Rp 33.3 trillion of assets, about 80 percent of which were already in Indonesia. So far, $91 million of offshore assets have been repatriated.

"This is worrisome, especially because the amount repatriated, the fresh money that would be more beneficial for the economy, was still so low, so far from target," said Lana Soelistianingsih, economist at Samuel Aset Manajemen in Jakarta.

She said a legal challenge to the amnesty, filed at Indonesia's Constitutional Court by activists last month, has made some people reluctant to join the program, fearing it might be scrapped. President Joko Widodo has said the government will "go all-out" to keep the law from being blocked.

Indonesia's tax revenue is under pressure from weak commodity prices that dented export earnings and companies' profit.

Sri Mulyani Indrawati, just days after leaving a top World Bank post to become finance minister, cut this year's budget by $10 billion to ensure the fiscal deficit stays below the 3 percent of GDP legal limit.

Indrawati is seeking to attract participants by steps such as setting up hotlines for questions and having tax offices open every weekend.

"Until now we are still hopeful about the tax amnesty," she told reporters on Tuesday.

"We always have plan B [for the budget], even plan Z if necessary. We've trimmed spending and for now we think that is sufficient. We will always monitor the situation and if an additional policy is needed, we will do something that won't harm the economy."

Reuters

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