Indonesia must signal tax amnesty won't be repeated, OECD says

[JAKARTA] Indonesia's government must make it clear to errant taxpayers that an amnesty program, which has revealed almost US$300 billion in undeclared assets, is the last chance to fix their affairs before full penalties are applied, the Organisation for Economic Cooperation and Development said.

"Authorities must communicate clearly that this offer will not be repeated," the OECD said in a report on Indonesia's economy released Monday in Jakarta. The amnesty was well-timed, the OECD said, as it comes within two years that global rules will be adopted to allow countries to exchange information to reduce the risk of tax evasion.

The government must signal that the Automatic Exchange of Information regime "will be used to locate undeclared assets and that full penalties will apply," the group said.

With the deadline for the tax amnesty's most generous phase having ended Sept 30, the number of people and institutions participating in the program stands at 421,037, with 3,863 trillion rupiah (S$412.3 billion) of assets declared. The government has earned 97.7 trillion rupiah in revenue from penalties, according to a tally on the Finance Ministry's website at 1pm local time on Monday.

Repeated tax amnesties in OECD countries had "been characterized by only temporarily increased tax revenues and encouragement of future evasion," according to the report. Indonesia had previously implemented amnesties in 1984 and 2008, the OECD said.

The government had projected as much as 165 trillion rupiah in revenue from the program to help fund President Joko Widodo's ambitious infrastructure plan and offset a slowdown in Southeast Asia's biggest economy. The OECD is forecasting expansion of 5.1 per cent in 2016 and 5.3 per cent in 2017.

BLOOMBERG