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Indonesia plans to offer tax amnesty soon as revenues slump
[JAKARTA] Indonesia plans to offer a tax amnesty soon to help coax money back into the country and boost dwindling state revenue, the Kontan newspaper reported, citing a draft of a law being discussed by the government and a parliamentary commission.
The tax breaks would be offered to taxpayers with undisclosed wealth at home and abroad, such as in neighbouring Singapore, which has long been a favourite spot for rich Indonesians to park their funds.
Taxpayers who make such disclosures before the end of this year will be taxed at a 3 per cent rate, the newspaper said.
That would go up progressively to 5 per cent for those declaring their wealth in January-June next year and 8 percent in the following six months.
Indonesia's tax rate on individuals can range from 5-30 per cent, and 20-25 per cent for companies.
One member of parliament involved in the discussion, Misbakhun, confirmed the report. Tax office spokesman Mekar Satria Utama declined to comment.
The tax amnesty draft was proposed by the parliamentary commission overseeing tax collection and is subject to government approval. It would still need to be passed by parliament.
The government of Southeast Asia's largest economy is struggling to boost revenues as prices of its key commodity exports slide.
From January to September, the tax office has only managed to collect 686.2 trillion rupiah (US$50.63 billion), or 53 per cent of its full-year target, excluding revenue from excise and export-import duty. That was slightly lower than the same period last year.
The tax office said last week it expected a shortfall of around 112.5 trillion rupiah this year, which could make the budget deficit swell to around 2.23 per cent of gross domestic product - in line with an earlier Finance Ministry projection.
Darussalam, a partner at Jakarta-based tax consultancy Danny Darussalam Tax Center, said next year is the right time to offer a tax amnesty, noting that Indonesian tax authorities will begin sharing information automatically with their counterparts in other countries in 2017 as part of a global agreement. "The era of banking secrecy would end in 2017. So taxpayers should know that they only have until 2017," he said.
Indonesia is Singapore's main source of wealth assets, representing 30-50 per cent of private banking business, according to a private banker in Singapore.
Although it is not clear how much of that money was untaxed, Singapore private bankers said their clients were already worried.