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Automatic information exchange: The lessons
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Finance Minister Sri Mulyani Indrawati (left) and director general of taxation Ken Dwijugieasteadi attend a meeting with House of Representatives Commission XI in Jakarta on Oct. 12. (Antara Photo/M Agung Rajasa)
I
ndonesia does not have any choice but to raise tax revenues to finance infrastructure development. As taxation is the backbone of our revenue, it is critical that leakage should be minimized.
This, according to Alex Cobham, can lower either the taxes to be paid, in the form of unpaid tax bills, or taxable income, due to tax competition or profit shifting to other jurisdictions.
This article particularly discusses the last type of leakage with reference to certain past events.
Following the tax amnesty, which is now in its final stage, government officials have made it clear that automatic exchange of information is the way to go.
Finance Minister Sri Mulyani Indrawati has said that this would significantly minimize the avenues for tax evasion.
Involving more than 101 countries, this initiative would enable the authorities to be notified automatically if a certain taxpayer opens a bank account in other countries.
In an article published a year ago, I wrote that such efforts might not be a quick fix, and that one of the problems to be addressed is the legal environment, such as banking secrecy provisions.
