EDITORIAL: Who are the real owners?
The Jakarta Post
Companies and other business entities, including foundations and trusts, can no longer hide the identity of their real controlling owners after the enactment earlier this month of Presidential Decree No. 13/2018 on the compulsory disclosure of real beneficial ownership.
The regulation, which complements the global treaty on the automatic exchange of information between tax authorities, defines a true beneficial owner as an individual who owns more than 25 percent of the shares of a business entity, holds more than 25 percent of the votes, receives more than 25 percent of the annual profits and has the authority to appoint, replace and dismiss members of the boards of management and commissioners.
It has thus far been extremely difficult to track the real beneficial owners of assets that are held by entities and other legal arrangements like shell companies, foundations and trusts, especially if they are held in or via secrecy jurisdictions or well-known tax haven territories.
As the Paradise Papers that were leaked last year have shown, many businesspeople, officials and criminals can hide behind layers of anonymous companies, trusts and foundations and can easily commit crimes such as tax evasion and money laundering. The persons nominally listed as in control could in fact be a proxy for the persons wielding power and influence, who ultimately gain financial benefits from the company or asset.
They manipulate the very concept of ownership. Even if there is full transparency it still wouldn’t be clear who owned the assets held in a trust. Companies are often owned by “nominees” — typically lawyers or other companies acting as the legal owners of assets, but which are in reality merely shields or fronts hiding the true owners of the assets.
In many tax haven territories, nominee directors or shareholders can be used as a vehicle to mask the identity of a beneficial owner, thereby making it difficult to identify the true beneficial owner of an entity. This issue has often been made more complex as there are many different laws governing company registrations and management in different countries.
Hence, the disclosure of beneficial ownership information will undoubtedly support the drive against corruption, tax evasion and money laundering. The new regulation will help track down financial crime and money laundering, catch criminals, curb tax evasion or other predatory market behavior by uncovering the true owners of assets.
The regulation also provides to the public access to information on the true beneficial owners of business entities, including cooperatives and foundations, in a bid to strengthen the oversight of business.
The new decree and the 2017 law that provides tax officials access to the financial information and bank accounts of taxpayers for tax purposes will greatly empower the tax authority to hunt down tax evaders.
The Corruption Eradication Commission (KPK) and the Financial Transactions Analysis and Reporting Centre will greatly be helped by the regulation to uncover corruption and money laundering.
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