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How can RI benefit from global tax cooperation?
The enactment of the Perppu demonstrates that Indonesia has a strong commitment to promote global cooperation in tackling tax evasion.
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The enactment of the Perppu demonstrates that Indonesia has a strong commitment to promote global cooperation in tackling tax evasion. (Shutterstock/File)
President Joko “Jokowi” Widodo now has more confidence to attend the upcoming G20 Summit, which will be held in Hamburg, Germany, in July of this year.
After having a long debate about the importance of an exchange of information on taxation and its possible implications for the bank secrecy law and investment in Indonesia, on May 8 the government issued Government Regulation in Lieu of Law (Perppu) No. 1/2017 on financial information access for taxation purposes.
The Perppu authorizes the finance minister to conduct an exchange of information on taxation with foreign tax jurisdictions. This is an important commitment that Indonesia declared to the G20 and Organization for Economic Co-operation and Development (OECD) member countries in 2014.
The Indonesian government recognizes an urgency in the introduction of the Perppu. Indonesia could be considered a country that fails to meet its commitments on the automatic financial information exchange if it is unable to introduce the legal framework by June 30.
The credibility of Indonesia as a G20 member and the trust among investors will be at stake. Indonesia may also be classified as a destination country for illegal financial transactions.
The urgency has a strong basis of argument. In a report recently published by the OECD, Indonesia and Turkey are the only two G20 member countries that are classified “partially compliant.” Other G20 members are already classified as either compliant or largely compliant in their ability to meet their commitments on the Automatic Exchange of Information (AEOI).
The OECD is also concerned about Indonesia’s ability to provide information in a timely manner (90 days). Another concern is the lack of awareness among local tax authority officials, which will affect the duration of the process of obtaining the requested information.
