Indonesia will propose penalties for countries that deliberately allow tax avoidance, Finance Minister Bambang Brodjonegoro says. (Antara Photo/Hafidz Mubarak A.)

Indonesia to Urge G20 to Tighten Global Tax Framework


APRIL 12, 2016

Jakarta. Indonesia will propose penalties for countries that deliberately allow tax avoidance as well as the establishment of an international tax authority in the next G20 meeting, as part of its fight against cross-border tax crimes, Finance Minister Bambang Brodjonegoro said.

The minister will speak at the G20 meeting, part of the annual World Bank Group and International Monetary Fund's Spring meetings, held in Washington D.C. from April 15 to 17. The event will bring together central bankers, finance ministers, business executives and academics to discuss global economic issues.

Bambang's proposal reflects the view that corporations should pay taxes where they make profit. To that end, the G20 has endorsed voluntary guidelines against base erosion and profit shifting (BEPS) and the Automatic Exchange of Information (AEOI) frameworks, with a view to close loopholes that in the past allowed individuals and companies to shift their income to tax haven countries.

"We want no exception on automatic exchange of information. [...] We don't want cases where a country can hide the ultimate beneficiary of an account or hide the true owner of an account," Bambang told reporters on Monday (11/04).

Bambang said the world needs an international tax authority to enforce penalties for countries that fail to implement the global tax frameworks.

"[The penalty] can be in the form of an expulsion. If [a country] chooses not to follow the rules, it should not be a member of the international financial society," Bambang said.

Combined, the G20 countries account for 85 percent of the global economy, 80 percent of global trade and 66 percent of the world population.

The minister's comments come a week after German newspaper Süddeutsche Zeitung published a story on the so-called Panama Papers, the largest document leak on offshore companies obtained from Panama-based firm Mossack Fonseca.

Indonesia is under pressure to close its fiscal gap this year due to a decline in revenue from commodities. Meanwhile, wealthy Indonesian individuals and companies are believed to have placed $870 billion — more than the country's GDP — in offshore assets to avoid taxes, according to an estimation from the Finance Ministry.