The Jakarta Post
Taxpayers who have consistently filed properly filled-out annual income tax return forms to the tax office need not worry about the enforcement of Presidential Regulation in Lieu of Law (Perppu) No. 1/2017 on access to financial information and bank accounts for tax purposes.
After thoroughly perusing the Finance Ministry’s directive on the technical details and procedures on how data on financial accounts of taxpayers can and should be submitted to the tax authority, and what criminal charges are liable for tax officials who abuse the information, we find there are actually not many new rules with regard to tax officials’ access to taxpayers’ financial accounts.
Current tax laws already require all individual and institutional taxpayers to stipulate all their financial and fixed assets in their annual income tax returns. They need not worry about any changes in their annual income tax returns and asset value, as long as they can account for changes in their income profiles. After all, unusually big changes in their bank accounts will be detected by the Financial Transactions Report and Analysis Center (PPATK), which monitors suspicious financial transactions in lorder to prevent money laundering.
The most fundamentally new rules in the Finance Ministry’s directive that implements Perppu No.1/2017 are related to the obligation of all financial service companies (banks, and insurance and securities firms) to regularly report to the tax authority the financial accounts of their clients for monitoring and examination starting next year.
Financial service companies are currently not obliged to regularly file data on their clients’ accounts to the tax authority. Hence, if taxpayers are not honest in stipulating all their financial accounts in their annual income tax returns, tax officials cannot automatically access the data from financial companies even for tax audits. They should obtain prior approval from the Finance Ministry. But Perppu No. 1/2017 authorizes tax officials to look into taxpayers’ financial accounts at any time in light of a tax examination.
However, the financial accounts of individual taxpayers subject to mandatory reporting are limited to those with a minimum balance of Rp 200 million (US$15,036) for domestic transactions and $250,000 for international transactions in light of the global Automatic Exchange of Information (AEOI) portal between tax authorities. No such limitations are imposed on institutional taxpayers.
The government mandates a broader access to taxpayers’ financial accounts to prevent tax evasion and to fulfill the compulsory reporting standards within the AEOI, which Indonesia and over 105 other countries have committed to enforcing next year to fight tax avoidance and evasion. These countries signed the multilateral instrument to prevent tax avoidance practices through baseerosion and profit shifting (BEPS) at the Organization for Economic Cooperation and Development (OECD) headquarters in Paris on Wednesday.
BEPS is a term used to describe multinational companies’ tax planning strategies that rely on mismatches and gaps existing between the tax rules of different jurisdictions to minimize corporation tax.