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RI, HK agree to eliminate double taxation, tax evasion
JP/RICKY YUDHISTIRAIndonesia and Hong Kong signed a bilateral agreement Tuesday on the avoidance of double taxation and the prevention of tax evasion in the hope of enhancing mutual business opportunities
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JP/RICKY YUDHISTIRA
Indonesia and Hong Kong signed a bilateral agreement Tuesday on the avoidance of double taxation and the prevention of tax evasion in the hope of enhancing mutual business opportunities.
The agreement will eliminate double taxation issues encountered by Hong Kong and Indonesian businesses, and bring lower tax rates to cross-border economic activities.
It was signed by Hong Kong Financial Secretary John C. Tsang and Indonesian Finance Minister Sri
Mulyani Indrawati.
“This would help in doing business in Hong Kong and Indonesia. It provides certainty for businesses.
They will pay less tax than they are now. So we expect this would facilitate and enhance business opportunities,” Tsang said in an interview with The Jakarta Post.
He said Hong Kong and Indonesia should foster closer business cooperation after the recent global financial crisis. He said trade in Asia should be expanded to compensate for the decline in exports to the US and EU countries.
“We can do more things together, particularly as our traditional markets — the US and EU countries — are importing less. So I think we need to expand our own regional market to compensate for exports we have lost in traditional markets,” he said.
Under the agreement, he said, Hong Kong and Indonesian businesses will have their taxes more than halved.
Tax income on dividends which now stand at 20 percent, will be cut to 10 percent; and for a shareholder owning at least a 25 percent share in a company, tax will be further reduced to 5 percent.
Tax on royalties, which now stand at 20 percent, will be capped at 5 percent.
The Indonesian directorate general of taxation said it would pursue similar tax agreements with other countries to pursue tax evaders.
“We’re negotiating with Serbia and Oman. We’re renegotiating with Malaysia and some European countries. What’s important is information exchange. We can ask information now,” said Syarifuddin Alsah, director of tax regulations.
On Tuesday, Tsang also met the central bank to discuss cross-border banking supervision and
development of Islamic finance, which he said was an “ethical investment tool”.
“We see a lot of potential for Islamic finance as an alternative investment. Not only for Muslims, but for everyone,” he said.
Tsang said on Wednesday he would meet the Coordinating Economic Minister Hatta Rajasa, Trade Minister Mari Elka Pangestu and Fuad Rahmany, head of the Capital Market and Financial Institutions Supervisory Agency, to discuss various issues.
He also explained that Hong Kong would become a platform for the internationalization of the Chinese currency the renminbi to become one of the world’s convertible currencies, which would change the dynamics of the world currency system.
“Now the US dollar is the main reserve currency, the main currency for business in the world for
most transactions. But as the economy of China grows, as the business involving Chinese entities grows in the future, then the renminbi will become a more important currency,” he said.
“When it becomes a convertible currency, a significant and international currency, certainly the dynamic of it, and also of the US dollar, and the euro, will surely change. But we have to look at the geopolitics at that time. So we can see how things will change,” he added.
