Banks Calls for Tax Office to Rescind Transparency Rule on Tax Info
[Updated at 09:45 p.m. on Wednesday, February 11, 2014]
Jakarta. Banks are calling for the tax directorate general to rescind its newest regulation which, from April, will require lenders to start reporting customers’ tax identification number, address and tax deductions.
Lenders are concerned that by complying with the rule they may breach bank secrecy law, which in turn would drive away funds from the country’s banking system.
“I have asked our customers about this and they are quite scared,” Budi Gunawan Sadikin, president director of state-controlled Bank Mandiri, said on Wednesday.
While the tax office does not ask for customer’s account balances, tax officials can guess the amount using tax deduction information, said Jahja Setiaatmadja, president director of Bank Central Asia on Tuesday.
“It’s the same thing, really. There is a potential breach of law,” said Jahja, adding that the tax office had yet to formally notify BCA about the new rule. The 1998 Banking Law prevents banks from sharing customers’ account balance and personal information — except for taxation purposes, criminal investigations, civil cases and debt settlements.
Sharing the information for tax purposes “is supposed to be an exception — reserved for special cases — to the general rule of secrecy,” said Sigit Pramono, the chairman of the Indonesia Banking Association. “But now the tax office wants to make it the general rule.
“This could lead to capital flight from the country, as customers will not feel comfortable with the tax office tracking their money,” Sigit said.
Banks used to share particular customers’ information with the tax office during tax investigations, but no longer.
Benny Poernomo, president director of MNC Bank International, expressed concern too over severe penalties for any bank secrecy, while others are concerned about the long-term implications of the rule.
“There will possibly be a psychological impact on depositors’ behavior,” said Bank OCBC NISP president director Parwati Surjaudaja late on Tuesday.
In order to raise funds, Indonesian banks rely on wealthy customers’ deposits. Banks are known to offer lavish door-prizes — from luxury cars to all-expenses-paid trips abroad — and interest rates higher than those offered by the Deposits Insurance Corporation to lure customers.
Still, the tax office has played down the concerns. “Capital flight, I don’t think so. If someone, who has a normal bank account, like a businessman or a state officer, it is unlikely they will move their money abroad easily,” said Wahyu K. Tumakaka, a director at the tax office.
Indonesia is among a minority of countries in the world — Brunei Darussalam, Dominica Republic, Guatemala, Luxembourg and British Virgin Islands — that still do not grant access to bank information for tax purposes, according to a 2014 report from OECD’s Global Forum on Tax Transparency and Exchange of Information for Tax Purpose.
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