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overnment and lawmakers are one step away from passing the controversial tax amnesty bill into law, which is expected to bring back trillions of rupiah worth of assets parked overseas and prompt the declaration of illicit assets at home.

The government and members of House of Representatives Commission XI, overseeing banking and finance, approved on Monday the final draft of the bill after long and intense deliberations since early this year, with several sessions held behind closed door in a posh hotel.

The draft will be endorsed in a plenary session on Tuesday, with the ruling Indonesian Democratic Party of Struggle (PDI-P), the Democratic Party and the Prosperous Justice Party (PKS) remaining reluctant to approve the draft.

According to a copy of the draft obtained by The Jakarta Post, there will be a 2 to 10 percent penalty or redemption rates imposed on those who apply for the amnesty. The rates will differ, depending on the time when people apply and whether they intend to bring their funds back home.

For instance, individuals who apply in the first three months — after the law comes into effect — will choose between 2 percent and 4 percent rates. The lower rate will only be applicable for people wishing to repatriate their funds as well.

On the other hand, people who look to declare their wealth only will “enjoy” a higher rate at 4 percent.

The longer it takes for people to apply, the higher the penalty rates they face. The amnesty process is expected to be complete in March 2017.

There will also be special rates for small and medium enterprises (SMEs) that want to take part in the amnesty program. Businesses with assets worth up to Rp 10 billion (US$750,000) will get 0.5 percent, while those with assets exceeding Rp 10 billion will get 2 percent.

The penalties will be imposed on net assets and participants will be required to settle their tax arrears before they can obtain the amnesty. People implicated in a legal tax case at the court will be excluded from the program.

The draft also shows that there will be a series of investment tools, in which people can put their repatriated funds. They include debt papers issued by the government, state-owned enterprises, state-run development institutions and private firms.

People will be able to choose using financial investments at appointed banks and real sector investments pre-determined by the government as well. The repatriated funds must stay onshore for at least three years.

All in all, the government is hopeful about reaping at least Rp 165 trillion from the amnesty, so that it can plug this year’s state budget deficit.

“Many countries are competing to attract capital to move their economies,” Finance Minister Bambang Brodjonegoro said during one session on Monday evening, adding that Indonesia was no different.

Such a move was crucial because it had no source of growth amid plunging exports and slow streams of foreign direct investments, he added.

The government expressed hope that inflows of the repatriated funds would help boost the economy, which slowed to 4.79 percent last year, the slowest since 2009.

Meanwhile, the Financial Services Authority (OJK) has issued five regulations to develop and improve capital investment instruments to prepare for capital inflows.

“Ten more regulations will follow in the second half to make the capital market more attractive for investment,” said Nurhaida, OJK commissioner for capital market supervision.

Some of the recently issued regulations will make it easier to penetrate the capital market, including by providing leniency to securities firms.

The OJK is waiting for lawmakers to formulate a law that will allow participants to diversify portfolios, while still complying with the three-year investment lockup period.

Commenting on the draft, Bahana Securities research head Harry Su said the three-year holding period was sufficient.

Center for Indonesia Taxation Analysis (CITA) executive director Yustinus Prastowo said low rates were needed to attract people to the scheme, adding that CITA estimated additional revenues of Rp 80 to Rp 100 trillion.

“The Rp 165 trillion forecast is too high because it assumes people will opt to join in the early period to get low rates,” he said.
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Highlights from final draft bill on tax amnesty

Redemption rate for declared/repatriated assets that are invested in RI for at least 3 years

2% From first to third month of declaration/repatriation

3% From fourth month of declaration/repatriation until Dec. 31, 2016

5% From Jan. 1, 2017 to Mar. 31, 2017

Redemption rate for declared/repatriated assets that are not invested

4% From first to third month of declaration/repatriation

6% From fourth month of declaration/repatriation until Dec. 31, 2016

10% From Jan. 1, 2017 to Mar. 31, 2017

Redemption rate for SME taxpayers with up to Rp 4.8 billion assets as of Dec. 31, 2015

0.5% for declaration/repatriation of up to Rp 10 billion assets

2% for declaration/repatriation of more than Rp 10 billion assets


Where to invest the declared/repatriated funds?

* Government bonds

* State-owned companies’ bonds

* Corporate bonds

* State-run development institutions

* Financial investment at appointed banks, including state-owned lenders

* Stock market

* Real estate investment trust (REIT)

* Mutual funds

* Investment in infrastructure projects

* Real sector investments pre-determined by the government

* Other legal instrumen