In a hearing at the House of Representatives, academics suggested the government should push for a higher tax rate in the tax amnesty bill currently under deliberation to maximize government revenue. (Investor Daily/Emral)

Finance Commission Lawmaker: Tax Amnesty Needs Faster Political Process


OCTOBER 04, 2015

Jakarta. A legislator from the House Commission XI, which oversees finance and banking affairs, unveiled some details of a draft law on tax amnesty set to be discussed by the House of Representatives.

Muhammad Misbakhun, who sits on the House Commission XI, said the planned law is aimed to help boost tax collection next year.

He said discussion for such a policy "needs a faster political process" at the House for it to come in to effect before the 2016 tax collections begin.

Previously, the finance ministry's tax directorate general unveiled that the government is proposing a bill which will grant amnesty for tax evaders — except drugs offenders and terrorists — as long as they agree to bring their ill-gotten money in to Indonesia under the government’s terms and conditions.

The plan has drawn controversy among tax experts with opinions split with one side arguing it could reduce tax compliance overall, and the other side believing if it is coupled with ambitious new measures to reform the country's taxation system, it will work.

Misbakhun on Saturday said that the proposed bill will include the concept of capital repatriation, with money being returned to the country, instead of parking in overseas accounts which have become popular investment destinations, such as Singapore.

Secondly, the Golkar party politician said the program should pave the way for the money from what he calls the "underground" markets to enter formal financial institutions.

The program should settle a longterm problem of the Indonesian banking sector pushing away funds from the nation's richest, he said, without elaborating on the nature of the pushback.

Overall, Misbakhun sees the tax amnesty program as "national reconciliation" in which the benefits outweigh any potential harm.

"The government will be able to secure more taxation revenue from the tax amnesty, and also settle the long standing of structural problem in law enforcement," he said.

"Whoever seeks to utilize the scheme of the tax amnesty will be excluded from any charges [related to the tax evasion], apart from those involved in terrorism and drugs," he said.

Misbakhun said the bill will be discussed in the next hearing session of the House after lawmakers end the recess period on Nov. 22.

Indonesia's richest, many of whom are ethnically Chinese, experienced racial issues in 1998 at the height of the Asian financial crisis, when riots stormed not only business areas, but also private residences.

The result of these riots and resulting uncertainties led many of Indonesia's richest to take their funds to Singapore, which offered safer investment prospects.

With time, as the economy recovered and racial problems minimized many called on Indonesia to learn from other countries successful similar program.

Hariyadi Sukamdani, the chairman of the Indonesia Employers Association last year told The Jakarta Globe that a good example from Europe is in Italy, where a tax amnesty program was introduced in 2001, and by 2009 had yielded some 80 billion euros ($97.8 billion) of the 500 billion euros the country’s central bank estimated was held by citizens in undeclared funds overseas.