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Amnesty 'done deal' with strings attached
House of Representatives Speaker Ade Komarudin says legislators will be able to pass the tax amnesty bill shortly after they reconvene in early April, paving the way for the unprecedented repatriation of billions of dollars kept overseas by wealthy Indonesians
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House of Representatives Speaker Ade Komarudin says legislators will be able to pass the tax amnesty bill shortly after they reconvene in early April, paving the way for the unprecedented repatriation of billions of dollars kept overseas by wealthy Indonesians.
In a recent interview with The Jakarta Post, Ade expressed optimism that technical deliberations on the bill would be concluded within two weeks or a month at the latest, despite the possibility of opposition from factions opposed to the controversial tax repatriation scheme.
The Golkar Party legislator asked the public to take his word for it that the bill would be ready before legislators and the government began to discuss proposals for the state budget revision (APBN-P) in June.
'I can assure you, it's a done deal', Ade said, unwilling to reveal the political process behind the legislative enterprise.
'The political process behind this is like the manufacturing process in a tofu factory. There's no need to know how the inside works. It's dirty and disgusting. What you need to know is that once the tofu is done, it's good.'
Deliberations of the tax amnesty bill, which will incentivize those Indonesians storing illicit cash overseas to repatriate their money, were delayed from the House's previous sitting, raising concerns over the ability of the government to collect enough revenue to deliver on its major infrastructure promises.
'We've already struck a deal with the government after talking to the finance minister,' Ade said, hinting on the important role that Finance Minister Bambang Brodjonegoro played in securing the vote from House leaders.
Ade, a staunch ally of President Joko 'Jokowi' Widodo and the strongest candidate to lead Golkar, lauded the finance minister as a 'smart and humble' man capable of challenging the wits of legislators when it came to the tax amnesty scheme.
'Bambang knows how to communicate with the legislative body. He knows the ins and outs of our communication with the Cabinet,' he said.
He acknowledged that political will remained a hindrance in the deliberation process, saying that it might come down to a majority vote in a plenary meeting to pass the bill into law. Ade, however, pledged that the deliberation process would remain open and transparent.
The tax amnesty plan, which is expected to be implemented later this year, will pardon tax evaders and hopefully lead to the fund repatriation.
The government will slap a penalty of between 1 and 6 percent on the repatriated assets and unreported domestic assets ' far lower than the 30 percent income tax rate applied to certain individual taxpayers.
Revenues from the penalties are estimated to reach between Rp 100 trillion (US$7.51 billion) and Rp 200 trillion. It is thought that this figure will be almost sufficient to plug this year's estimated Rp 290 trillion budget deficit.
In the longer term, it is hoped that an estimated Rp 4.1 quadrillion ($307.5 billion) worth of assets hidden both overseas and domestically can be used to broaden tax base and boost tax revenues.
With the fate of the amnesty bill likely assured, Ade indicated that the House would be given leeway to propose an increased budget to fund a number of postponed legislative projects this year, including the ambitious plan to build Southeast Asia's largest public library within the House complex.
According to the Golkar politician, the new library will boast lots of space that, if needed, will also be able to accommodate legislators and their staff.
Center for Indonesia Taxation Analysis executive director Yustinus Prastowo said that, rather than seeking political interests, the government and legislators should seek an agreement based on reason, pointing out the positive impact that tax amnesty would give to the country.
'The policy exchange between the government and the House seems superficial. The House needs to understand that the tax amnesty draft bill will benefit the country,' he said. If applied, the regulation will bring back money stored by Indonesians overseas in tax havens such as the British Virgin Islands and Singapore.
'I think the regulation will be effective in increasing the country's revenue. It is not only the wealthy, but medium enterprises too, that will be asked to pay taxes,' Yustinus added.
Meanwhile, Gadjah Mada University economist Tony Prasetiantono said that while tax amnesty was unfair to compliant taxpayers, the practice was commonly done in other countries.
'Other than being an additional source of income for the state budget, the repatriation of funds parked overseas could add to foreign exchange reserves that could stabilize the rupiah,' he added. (adt/wny)
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