It is tax season, and 14 million individual taxpayers must fill and submit their tax reports. So far, 6.1 million reports have been filed, and the remaining taxpayers have until Mar. 31 to fulfill their obligation. (JG Photo/Afriadi Hikmal)

Indonesia Considers Tax Amnesty for Financial Crimes, Tax Office Chief Says

BY :HIDAYAT SETIAJI & EVELINE DANUBRATA

JUNE 24, 2015

The finance ministry grants companies operating in certain sectors a “tax holiday” by waiving their income tax requirements for five to 10 years. (JG Photo/Afriadi Hikmal)

Jakarta.  Indonesia's tax office is considering a tax amnesty for financial crimes, in a move that could bring at least 100 trillion rupiah ($7.5 billion) into state coffers, the director-general of taxes said on Wednesday.

Southeast Asia's biggest economy is grappling with its weakest growth in six years and a huge budget deficit, while its tax collection rate is one of the lowest in the region as a proportion of gross domestic product.

President Joko Widodo's administration has an ambitious tax revenue target of 1,489.3 trillion rupiah this year, up 30 percent from last year's collection.

Under the tax office's proposal, the perpetrators of financial crimes including corruption and money laundering can pay a 10-15 percent tax on the assets they bring back to Indonesia, in return for a pardon from criminal prosecution, Sigit Priadi Pramudito told reporters.

"Our priority is to pull back overseas funds. If we don't do anything, who benefits? It's Singapore," Pramudito said.

"There's no other way to take back those funds. The money has been stored in Singapore for decades."

There is an estimated 3,000 trillion rupiah ($225.56 billion) in Singapore alone, said Mekar Satria Utama, a spokesman for the tax office.

The plan is still under "intensive review" and Indonesia has not been in talks with the Singapore government yet, Utama said. It would need parliamentary approval.

A bill on the tax amnesty is expected to be deliberated as soon as this year, Finance Minister Bambang Brodjonegoro told local media on Sunday.

The Monetary Authority of Singapore did not immediately respond to an email seeking comment.

In 2008, under previous president Susilo Bambang Yudhoyono, Indonesia implemented a tax amnesty program called the "sunset policy", which brought in additional tax revenue.

"It's not a long-term fix. You can get a one-off increase, but that doesn't necessarily mean that over time the tax collection would be better," said Santitarn Sathirathai, head of Southeast Asia and India economics research at Credit Suisse.

Some longer-term measures include lowering the tax rate, increasing the attractiveness of the rupiah currency as a "store of value" and boosting the tax collection capabilities, Sathirathai said.

Additional reporting by Anshuman Daga

Reuters

SHARE