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EDITORIAL: Lifting iron-clad secrecy
Finance Minister Sri Mulyani Indrawati vented her anger last week that only 2.5 percent of 29.3 million registered institutional and individual taxpayers had thus far participated in the program, which will end after March 31.
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A man makes a transaction at a Bank Rakyat Indonesia ATM in Jakarta. (tempo.co/Eko Siswono Toyudho )
I
ndonesia’s attempt to lift banking secrecy, expected to start gradually in May, stems largely from protracted disappointment over taxpayer compliance. This is particularly relevant as the game-changing tax amnesty policy has failed to meet its desired target.
Finance Minister Sri Mulyani Indrawati vented her anger last week that only 2.5 percent of 29.3 million registered institutional and individual taxpayers had thus far participated in the program, which will end after March 31.
The extremely low participation has come to light amid revelations that some 16.2 million registered taxpayers had never submitted annual tax return forms, justifying the tax office’s suspicion that they have intentionally dodged their obligations.
Since last month, the government has prepared to lift banking secrecy to pursue tax dodgers after the amnesty program ends, believing that the swath of unreported assets may be in the form of bank deposits.
Banking secrecy is stipulated in both the Banking Law and the General Taxation System (KUP) Law, which protect the confidentiality of customers’ bank data, something that is frequently exploited by tax evaders.
The secrecy privilege has been held dearly. Any plan to have it lifted five years ago may have triggered capital flight as the policy surely frightens many rich Indonesians. But as the world unites to end such secrecy, wealthy individuals have fewer options to park their money to avoid paying taxes.
Indonesia is hitching on the Automatic Exchange of Information (AEOI) program, a global move that contains new standards to tackle global tax avoidance, to force banks to share their data, including with the tax authority. Another reason for the urgency to lift the privilege is a decline in Indonesia’s tax ratio to 11 percent of gross domestic product (GDP) from 12 percent in previous years, indicating the significant potential taxes that cannot be collected.
