T

he tax amnesty bill, which was formulated by the government and business associations, is now being deliberated at the House of Representatives.

However, most local business associations remain doubtful about the effectiveness of the measure, if implemented, in bringing back billions of dollars to the country as well as improving overall taxpayer compliance and widening the tax base, as claimed by the government.

“We all basically agree with the plan, but some are questioning whether the measure will really lure a huge fund repatriation,” Indonesian Chamber of Commerce and Industry (Kadin) vice chairman Suryadi Sasmita said on Tuesday during a hearing at House Commission XI overseeing finance.

The Indonesian Employers Association (Apindo) estimated that the scheme would attract around Rp 2 quadrillion (US$152.6 billion), far less than the government’s estimate of Rp 4.1 quadrillion.

Although there are no official statistics regarding the wealth held overseas by Indonesians or the amount of funds that might be retrieved by offering the pardon, Finance Minister Bambang Brodjonegoro has estimated that overseas wealth exceeds the country’s gross domestic product — currently Rp 13 quadrillion (US$988 billion) — and says it has been accumulating since the 1970s.

Under the scheme, the government expects the amnesty to entice rich individuals to bring home their wealth, on which they have avoided paying taxes by stashing it abroad for years.

They will be pardoned for their past tax violations, on certain conditions, such as that they pay off their tax arrears and redemption money. The amount to be redeemed will vary, depending on the timing of their application for pardon.

Meanwhile, another Kadin representative, Bambang Sungkono, questioned the urgency of the plan, saying there would be an automatic exchange of information (AEOI) in 2018, when participating countries are obliged to exchange non-resident financial account information with tax authorities in the account holders’ countries of residence.

“Even if the AEOI is implemented, I think people will still find a way to avoid taxes by withdrawing their money from banks and investing it in gold or property instead,” he said.

There are 98 jurisdictions that have committed to the AEOI at present, with Indonesia, along with another 42, slated to undertake the first exchange in 2018. Another 55 countries, meanwhile, are set to implement the commitment by 2017.

On the other hand, the Association of Young Indonesian Businessmen’s (Hipmi) tax center chairman, Ajib Hamdani, said his association would fully support the implementation of the tax amnesty bill, if turned into law, as it would likely cover the state budget shortfall of around Rp 290 trillion this year.

“However, the government should be able to make use of data obtained from the tax amnesty, if it materializes, to make it sustainable,” he said.

Ajib recalled that the government’s 2008 sunset policy, which targeted companies, was successful in closing a budget shortfall but failed to sustain in subsequent years because of the government’s inability to optimally use the database.

House Speaker Ade Komarudin previously gave his assurances that talks on the tax amnesty bill would be completed by the end of the current sitting period on April 29, after a meeting with President Joko “Jokowi” Widodo.

The draft law has sparked controversy as many argue the plan is an unjust move that will offend compliant taxpayers. Experts, including from the International Monetary Fund (IMF), say governments that have implemented such schemes in other countries have failed to achieve their objectives.

Separately, Andreas Eddy Susetyo, an Indonesian Democratic Party of Struggle (PDI-P) lawmaker at Commission XI, said on Tuesday that his commission would question the government’s main purpose for the tax amnesty.

“If they really need fresh funds right now to close the budget deficit, why don’t they crack down on the 79 percent of names that appeared in the Panama Papers that they said are accurate?” he said.

Andreas said that if the go-vernment had complete data on 79 percent of the names of 2,961 Indonesians mentioned in the papers, it would be easy to meet the shortfall.
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