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Tax Amnesty Program Indonesia is a Success Except for Repatriations}
Tuesday, 8 November 2016 | 13:19 | 0Comment
Contrary to our earlier
predictions, Indonesia's tax amnesty program has been on a roll in September
2016. The program is designed to boost the government's tax revenue by offering
tax evaders attractive rates to come clean and declare their previously undeclared
assets (whether stashed at home or abroad in the so-called tax havens). Those
who join the program can also repatriate offshore assets into Indonesia, into
specifically prepared investment instruments where the funds need to stay for
at least three years.
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Although the nine-month tax amnesty
program runs until 31 March 2017, most tax declarations and fund
repatriations are expected to occur before 30 September 2016 as taxpayers can
enjoy the most attractive tax rates in the period that ends on 30 September
(each quarter the tax tariffs increase).
Last week Indonesian authorities announced that they will be more
flexible in terms of administrative procedures in relation to the deadline of
the first phase of the tax amnesty program. Attachments to taxpayers' asset
declaration letters can be submitted after 30 September but they will still be
able to enjoy the most attractive tax tariffs set in the first phase of the
program. The government decided to be more flexible on the request of various
businessmen who stated that they required more time to calculate and process
documents.
Up to 11:00 pm local Jakarta time on Wednesday (28/09), the
government had collected IDR 84.6 trillion (approx. USD $6.5 billion) in
additional tax money under the amnesty program, or roughly 51 percent of its
target (IDR 165 trillion). Meanwhile, some 8,500 new taxpayers have been added
to the database of Indonesia's Tax Office since the launch of the program in
July 2016.
President Joko Widodo (Jokowi) should also be praised for the
successful tax amnesty program so far. A successful amnesty program indicates
that there exists a high degree of trust among the Indonesian
population in the current government. Perhaps also the appointment of Sri
Mulyani Indrawati, a highly respected technocrat who previously served as
managing director at the World Bank for six years, as Indonesia's Finance
Minister in the latest cabinet reshuffle has contributed to the success.
However, asset repatriations are still somewhat left behind. By
11:00 pm on Wednesday, a total of IDR 142.3 trillion (approx. USD $10.9
billion) had been repatriated into Indonesia, or roughly 14 percent of the
government's target (IDR 1,000 trillion). As fund repatriations should become
more scarce as we approach the second (and third) phase of the program,
implying higher tax tariffs, this government target may not be achieved. If not
achieved, this failure is due to the unattractive rates that are offered
(compared to the rates that apply in tax havens) and the unattractive
requirement to keep assets in Indonesia for at least three years.
Most of the funds that have been repatriated so far into Indonesia
originate from Singapore, Cayman Islands, British Virgin Islands, Australia,
Hong Kong and China.
Indonesia's tax amnesty program in 2016/2017 is already more
successful compared to similar programs in Italy (2009), Chile (2015), Spain
(2012), South Africa (2003), Australia (2014) and Ireland (1993).
Bank Indonesia Governor Agus Martowardojo said asset repatriations
are more important compared to tax declarations in terms of overall economic
growth of Indonesia. According to the central bank, if there are asset
repatriations worth up to IDR 180 trillion under the tax amnesty program, then
it should boost Indonesia's GDP growth by 0.1 additional percentage point in
2017. The Indonesian government targets for a 5.1 percent (y/y) economic growth
pace in the 2017 State Budget.
Note :
My comment relating to the problem : |
My comment relating to the problem :