inance Minister Sri Mulyani Indrawati’s warning that the Directorate General of Taxation (DGT) will more stringently enforce tax laws to hunt down non-compliant taxpayers could simply be taken as bluffing if the tax office does not have stronger authority and cannot access banks and other financial accounts of taxpayers.
Even though President Joko ‘Jokowi” Widodo has proudly appraised his tax pardon program as the most successful in the world, Mulyani understandably is still disappointed that so far only around 683,000 taxpayers have availed themselves of the nine-month facility, which is to end later this month. DGT data show that almost 3 million registered taxpayers have never filed an annual tax return.
The strong-willed finance minister therefore has repeatedly warned that taxpayers, who stubbornly refuse to take advantage of the tax amnesty and continue to keep their assets within the country or overseas outside the national tax net, would be liable to fines of up to 200 percent of their normal taxes.
And Mulyani is not bluffing. Fully realizing that several laws have to be amended to give the DGT stronger authority and autonomy, and also that this political process may take years to pass through the House of Representatives, the Finance Ministry is now preparing a government regulation in lieu of law to stipulate all the amendments needed.
Most important of the amendments is the removal of the secrecy rules from the laws on banks, other financial services and capital markets to give stronger authority to tax officials to access taxpayers’ financial data.
The removal of the banking secrecy code is also needed to enable Indonesia to join the Automatic Exchange of Information (AEOI) framework among the tax authorities of more than 100 countries to hunt down tax evaders around the world. Under the AEOI program, financial institutions including banks, investment firms and insurance companies, say in Singapore or Switzerland, are required to collect certain information from both existing clients and from individuals and entities opening new accounts.
So any Indonesians who have existing accounts in those two countries or are planning to open new ones will be obliged to disclose all the basic information, including names, addresses, tax residency status and tax identification numbers, with all this information being automatically available to the Indonesian tax authority. Also in the pipeline as part of the overall tax reform agenda is the granting of stronger autonomy to the DGT to make it more effective and efficient.
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