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Govt assesses compliance with AEOI rules
Indonesia’s tax authority is working with ministries and state bodies to ensure that the country’s laws and regulations comply with new standards set out in the global Automatic Exchange of Information (AEOI) agreement to fight tax evasion and avoidance
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ndonesia’s tax authority is working with ministries and state bodies to ensure that the country’s laws and regulations comply with new standards set out in the global Automatic Exchange of Information (AEOI) agreement to fight tax evasion and avoidance.
The Global Forum on Transparency and Exchange of Information — part of the Organization for Economic Co-operation and Development (OECD) that supervises the AEOI — is currently assessing OECD member countries and jurisdictions to ascertain whether their laws and regulations are in line with the new set of standards, which focuses on the beneficial ownership concept.
The standards require all financial data reported by legal entities, such as companies, partnerships, foundations and trusts, to include information on the beneficial owners — those who enjoy the benefits of ownership even though they may not hold a formal title within the entity.
The international taxation director at the Directorate General of Taxation, John Hutagaol, said the tax authority was coordinating its efforts with institutions outside the Finance Ministry.
“The international community wants to see whether our regulations cover the issue [of beneficial ownership]. Therefore, the Directorate General of Taxation is not working alone in facing this assessment,” he said recently.
The ministries and institutions the tax office is working with include the Financial Transaction Reports and Analysis Center (PPATK), the Corruption Eradication Commission (KPK), the Indonesia Stock Exchange (IDX) as well as the Cooperatives and Small and Medium Enterprises Ministry.
The head of the OECD Global Forum’s secretariat, Monica Bhatia, said previously that Indonesia as an AEOI partner country would be reviewed as early as next quarter and the country should take action as soon as possible.
John said the tax office already had its own rules regulating beneficial ownership, but it needed to discuss closely in particular with the PPATK, because the latter was also in the process of drafting a presidential regulation on the issue to fight money laundering.
In the tax authority’s domain, issues related to beneficial ownership are stipulated in Directorate General of Taxation Regulation No. 25/2010, which revised a 2009 regulation on the prevention of abuse in double taxation avoidance agreements.
Meanwhile, on the PPATK’s side, the proposed presidential regulation will require companies to provide information on their beneficial owners, as the government found that a lot of transactions were using a nominee or beneficiary behind the legal owner.
The government has committed itself to dealing with beneficial ownership issues in the mining as well as in the oil and gas industry in a move to comply with international standards set by the Extractive Industries Transparency Initiative (EITI).
The EITI — consisting 21 members representing countries, civil society organizations and institutional investors — is a set of global standards to promote the open and accountable management of extractive resources.
However, experts warns that the tax authority must improve its IT systems and human resources to handle sensitive taxpayer data as well as continuously improve its operations.
“The [AEOI] implementation should not be led merely by the tax office, because it is not just a tax authority matter, but rather a state matter,” said Yustinus Prastowo, executive director of the Center for Indonesian Taxation Analysis (CITA).
