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Indonesia to trace and tax assets kept hidden during amnesty

[JAKARTA] Indonesia's government has issued new regulations aimed at tracing and taxing the wealth of taxpayers who were not pardoned in the nine-month tax amnesty that ended in March.

Around 972,000 taxpayers joined the amnesty programme and declared assets worth a total of 4,881 trillion rupiah (S$496.3 billion). About 24 per cent of that was held offshore, mostly in Singapore, and only a small percentage of it was pledged to be brought back home.

President Joko Widodo vowed last year to implement a "tax law enforcement" programme in 2017 following the amnesty. His finance minister, Sri Mulyani Indrawati, warned tax dodgers that if they did not join the amnesty, they would face "hell".

But the government later acknowledged that tax amnesty declarations and the pledged repatriation of offshore assets back to Indonesia did not correspond to data it had on taxpayers' foreign holdings.

In a guide to the new regulations, the government said it had also detected onshore assets that were not reported under the amnesty and had not been obtained with taxed income.

"Given that condition, after the tax amnesty programme ended it must be followed by law enforcement in the taxation field," it said.

The regulation calls for all assets that were not reported or were misreported in the amnesty programme, and which were obtained between Jan 1, 1985 and Dec 31, 2015, to be treated as untaxed income.

The estimated value of the undeclared assets has not been made public.

If the assets are found by the authorities before July 1, 2019, they will be subject to a final income tax of 30 per cent for individuals, 25 per cent for companies, and 12.5 per cent for special cases.

That compares with personal income tax rates of 5-30 per cent and corporate income tax rate of 20-25 per cent. Indonesia does not have a wealth tax.

Earlier this year, Indonesia's government granted tax authorities wider access to information on customer accounts at banks and other financial institutions.

Starting next year, the tax office will also get data on Indonesian taxpayers assets kept in jurisdictions that are signatories to the OECD's Automatic Exchange of Financial Account Information in Tax Matters.

Dr Indrawati has previously said Indonesia's tax-to-GDP (gross domestic product) ratio of below 11 per cent was "hard to swallow" and she was committed to raising it to 16 per cent by 2019.