The draft bill on a tax amnesty, submitted by the government to the House of Representatives on Tuesday, is expected to pave the way for an unprecedented repatriation of billions of dollars kept overseas by wealthy Indonesians, but at a cost of immunity from prosecution for all manner of tax crimes.

If the bill is passed, with its implementation scheduled for the second half of this year, Indonesians with illicit cash overseas will receive hefty incentives to repatriate the funds.

A copy of the draft, obtained by The Jakarta Post recently, stipulates that such individuals will only have to pay penalties of between 1 percent and 3 percent of their repatriated assets '€” far lower than the current corporation taxes of up to 25 percent on and 30 percent income tax for individual taxpayers.

The repatriated assets will be required to be invested in government or state-owned company bonds with a holding period of at least three years. Such rupiah-denominated bonds usually offer a yield of at least 8 percent per year.

However, the bonds can then be switched to other investment instruments such as private company bonds upon request.

The repatriated funds can also be invested in the government'€™s infrastructure projects, property and government-priority industries, according to the bill.

'€œThe tax amnesty is more than just a tool to increase state revenues. It will be the catalyst for the repatriation of Indonesian assets deposited overseas,'€ said legislator Johnny G. Plate.

'€œThe expected repatriations will help strengthen domestic liquidity, as we are in need of more funding for infrastructure.'€

Finance Minister Bambang Brodjonegoro had earlier estimated that around Rp 2.7 quadrillion (US$195 billion) worth of assets are kept by wealthy Indonesians overseas and Rp 1.4 quadrillion of domestic assets have not been properly reported.

Inflows of such funds are greatly anticipated by policy-makers at fa time when Indonesia is in dire need of foreign funding to keep its economy intact amid fears of another global economic meltdown.

A source at the ministry said the government particularly expected the amnesty to trigger repatriation of cash deposited in Switzerland worth billions of dollars owned by 84 Indonesians who appeared to be heavyweight politicians and businessmen.

The ministry received the data on the individuals from intelligence exchanges with authorities in the US, France and South Korea.

Rich Indonesians with assets overseas are likely to feel comfortable with the repatriation as anyone joining the amnesty will be immune from possible criminal prosecution for their tax evasion and avoid administrative penalties on their declared assets.

Data and information provided when applying for the amnesty will not be able to be used as a legal basis for criminal investigations or prosecutions of any kind, according to the bill.

'€œMany businessmen will be comfortable joining the amnesty and repatriating their assets as there will be a raft of legal protections and certainties,'€ said businessman Sofjan Wanandi, who is also chief advisor to Vice President Jusuf Kalla.

Since the fall of president Soeharto in mid 1998, many members of Indonesian conglomerates with close links to the former dictator and their families have parked their assets overseas to escape prosecution.

'€œWhat'€™s important is for the repatriated funds to be invested here to generate jobs and bolster economic activities,'€ said Indonesian Chamber of Commerce and Industry (Kadin) chairman Rosan Roeslani.

'€œIt'€™s better for the funding not to be invested in paper here but in real economic activities.'€

Sofjan, who is among the architects of the amnesty along with Coordinating Political, Legal and Security Affairs Minister Luhut Pandjaitan, expects the facility to be implemented in the second half of the year.

However, the bill'€™s deliberation is likely to be contentious as the ruling Indonesian Democratic Party of Struggle (PDI-P), the biggest faction in the House, has refused to support the bill unless President Joko '€œJokowi'€ Widodo agrees to amend the Corruption Eradication Commission (KPK) Law to curb the authority of the antigraft body.
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Excerpts of key articles in tax amnesty bill

Article 2: All taxpayers have the right to an amnesty except for those suspected of a tax crime and under investigation by the Attorney General'€™s Office (AGO) or who are currently on trial or serving prison time for a tax crime.

Article 3:

Penalties on assets registered in Indonesia:

* 2% if lodged less than three months after the law is passed,

* 4% if lodged between month four and six,

* 6% if lodged between month seven and 12 (the amnesty will last for one year).

Penalties on assets registered overseas:

* 1% if lodged less than three months after the law is passed,

* 2% if lodged between month four and six,

* 3% if lodged between month seven and 12.

Article 4: The penalties are calculated based on net assets as reported in 2015.

Article 11: Taxpayers wanting to apply for an amnesty on their cash or equivalent registered overseas should first repatriate funds into a designated local bank. Repatriation of non-cash assets should be completed with such a bank a year after the law is passed. Only assets registered overseas before Dec. 21, 2015 can be repatriated.

Article 12: Repatriated assets are required to be invested in government or state company bonds within holding period of at least three years. Taxpayers can switch the bonds after a year to other investment instruments: bonds of private companies whose trading is supervised by the Financial Services Authority (OJK), government infrastructure projects, sectors categorized as government priorities; property.

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