Controversial Tax Amnesty to Become Law Next Month, Minister Declares
January 8, 2016 | 9:35 pm
Jakarta. Indonesia’s chief economics minister says a controversial bill affording amnesty to tax dodgers could be passed as soon as next month, as part of a government plan to boost revenue collection.
The bill is aimed at encouraging taxpayers who fail to declare their wealth or keep it overseas to come clean and pay a lower rate than they would normally have been subjected to. The scheme is expected to benefit the country’s wealthiest individuals and companies, many of whom earn their money in Indonesia but keep it abroad, in particular in Singapore.
That has allowed them to avoid tax rates of as high as 30 percent for individuals and 25 percent for companies. Under the tax amnesty bill, they could enjoy rates of as low as 5 percent.
Darmin Nasution, the chief economics minister, said in Jakarta on Thursday that the government was awaiting the outcome of deliberations of the bill at the House of Representatives.
“Once it is done [passed], this policy will be implemented immediately,” he said.
Darmin, a former tax office chief and ex-governor of Bank Indonesia, said he expected the deliberations to take about a month, suggesting the bill could be passed in February.
Proponents of the tax amnesty hail it as a key step to repatriating funds for use in development programs, but critics point out that it effectively rewards tax cheats for not paying their dues. The benefits will not extend to those whose earnings are derived from or linked to corruption, terrorism or drug trafficking.
Now or never
Mukhamad Misbakhun, a Golkar Party legislator and member of House Commission XI, which oversees financial and banking affairs and is tasked with deliberating the bill, confirmed that the process would take about a month.
“We can start discussing the bill next week,” he said on Friday. He also denied speculation that the Singapore government had lobbied against the bill being drafted for fears of a capital outflow from the city-state.
Finance Minister Bambang Brodjonegoro previously estimated that the tax amnesty could boost tax revenue by up to Rp 60 trillion ($4.3 billion).
Among the provisions in the bill is one stating that the government has 30 days to respond to an application for tax amnesty. Should the government not respond in time, the applicant is automatically granted amnesty. The bill also states that within seven days of amnesty being granted, the tax office must issue an official letter of confirmation to the applicant.
Darussalam, a managing partner at tax consultancy Danny Darussalam Tax Center, called on the government to be careful in implementing the proposed amnesty.
He said that if applied only once, it may help the government in short term. But if used repeatedly, it would effectively become a loophole for tax evaders to evade paying their full obligation, he warned.
“[The government] must make clear that this is a now-or-never moment for tax evaders to get amnesty, and that no other chances will be given,” he said.
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