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Indonesia's tax amnesty shows slow progress in first month

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One month after getting launched, Indonesia's tax amnesty programme has brought in only a tiny fraction of the billions of dollars the government hopes will go into state coffers, a development that worries some economists.

[JAKARTA] One month after getting launched, Indonesia's tax amnesty programme has brought in only a tiny fraction of the billions of dollars the government hopes will go into state coffers, a development that worries some economists.

The government's target for the programme, which offers low rates for taxpayers declaring previously unreported wealth, is collection of 165 trillion rupiah (S$16.88 billion) of revenue by the end of December.

In addition, the government hopes that more than US$70 billion of assets overseas will return home under the amnesty.

The amnesty lasts only until March, but people joining it pay the lowest rates if they enter by Sept 30.

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As of Thursday afternoon, according to the finance ministry, revenue from the amnesty was 679 billion rupiah, or just 0.4 per cent of the programme target.

The ministry said 5,613 taxpayers had declared 33.3 trillion rupiah of assets, about 80 per cent of which were already in Indonesia. So far, US$91 million of offshore assets have been repatriated.

"This is worrisome, especially because the amount repatriated, the fresh money that would be more beneficial for the economy, was still so low, so far from target," said Lana Soelistianingsih, economist at Samuel Aset Manajemen in Jakarta.

She said a legal challenge to the amnesty, filed at Indonesia's Constitutional Court by activists last month, has made some people reluctant to join the programme, fearing it might be scrapped. President Joko Widodo has said the government will "go all-out" to keep the law from being blocked.

Indonesia's tax revenue is under pressure from weak commodity prices that dented export earnings and companies'profit.

Sri Mulyani Indrawati, just days after leaving a top World Bank post to become finance minister, cut this year's budget by US$10 billion to ensure the fiscal deficit stays below the 3 per cent of GDP legal limit.

Ms Indrawati is seeking to attract participants by steps such as setting up hotlines for questions and having tax offices open every weekend.

"Until now we are still hopeful about the tax amnesty," she told reporters on Tuesday. "We always have plan B (for the budget), even plan Z if necessary. We've trimmed spending and for now we think that is sufficient. We will always monitor the situation and if an additional policy is needed, we will do something that won't harm the economy."

REUTERS

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