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Jakarta Post

Tax amnesty may only profit a few

  • Tama Salim and Rendi A. Witular

    The Jakarta Post

Jakarta   /   Tue, December 1, 2015   /  06:10 pm

A plan to offer an amnesty to recalcitrant taxpayers with the hope of triggering a repatriation of Indonesian assets kept overseas has strayed away from its initial intentions as the draft bill indicates that it will likely only profit a few.

The Finance Ministry and the House of Representatives earlier boasted that the planned amnesty will bring home billions of dollars in financial assets parked overseas by members of Indonesian conglomerates.

However, a draft bill on the tax amnesty, a copy of which was recently obtained by The Jakarta Post, includes no mention of repatriation measures nor any policy providing any incentives to lure funds back to the country.

The only incentives provided are penalties of between 2 and 5 percent on tax arrears that evaders are required to pay if they report undeclared assets in a certain period of time.

Tax evaders will also be immune to possible criminal prosecution, as well as to administrative penalties on their declared assets.

'€œQuestions will arise about whether the penalties paid by our tax evaders have fulfilled the public'€™s sense of justice,'€ said House Legislation Body (Baleg) member Arif Wibowo of the ruling Indonesian Democratic Party of Struggle (PDI-P).

'€œThe public has problems understanding the connection between the government'€™s need to expand its tax revenues and the planned pardon for recalcitrant taxpayers,'€ he said.

Indonesia slaps income tax of as much as 25 percent on companies and 30 percent on individuals.

Indonesia'€™s version of amnesty is more lenient than that of Argentina, which also plans to implement a similar policy next year amid a shortage of dollars and a decrease of its foreign currency reserves.

Argentina will impose a penalty of between 3 and 6.5 percent tax on those who bring their cash back to the country.

The specific tax rate in Argentina will depend on what will be done with the assets back home instead of being tied to a specific period of time like those introduced in Indonesia. In Argentina, for example, those who repatriate funds to buy government bonds will have to pay only 3 percent tax.

Indonesia'€™s amnesty plan was announced by Finance Minister Bambang Brodjonegoro in June mainly as an opportunity to attract back more than US$300 billion in Indonesian assets, particularly from Singapore, and '€œlock them here'€ to generate jobs and bolster economic activities.

The plan, initially engineered by the Golkar Party, is also aimed at providing the cash-strapped administration with higher tax revenues to realize large-scale infrastructure projects next year. This year'€™s tax revenue collection is estimated to reach less than 90 percent of the target.

The House later took the lead in drafting the bill along with officials from the Finance Ministry'€™s directorate general of taxation.

However, along the way, Coordinating Political, Legal and Security Affairs Minister Luhut Pandjaitan also assumed a major role in drafting the bill, taking over the lead from the Finance Ministry and the Office of the Coordinating Economic Minister.

Luhut has repeatedly said that repatriation is not high on the amnesty agenda. '€œThere is no obligation to repatriate our funds through the amnesty,'€ Luhut, Indonesia'€™s former ambassador to Singapore, said recently.

Last week, the Baleg decided to relinquish the drafting of the amnesty bill entirely to the government and it expected the draft to be submitted to the House for joint deliberation this month in order to be approved by the end of the year.

Several politicians have said that the amnesty will only benefit a few bigwigs, such as Golkar chairman Aburizal Bakrie, whose firms are experiencing tax problems.

'€œThe subject of the amnesty individuals who refuse to comply with the regulations. Only problematic people will benefit from such a scheme. I don'€™t see any benefit for the public in general,'€ said Baleg member Khatibul Umam Wiranu of the Democratic Party.

Baleg member Misbakhun of Golkar, however, said that the focus should not be on repatriation, but on the potential tax revenues gained from the productive Indonesian assets invested overseas.

'€œProductive overseas assets should remain there so that we can receive taxes from the assets. The impact will be huge to our revenue stream,'€ said the former tax official.

He also said that there was also no need to expect cash deposited overseas to return because much of it had been used as collateral for investments and on productive activities elsewhere. '€œTell me whether in this age people are still interested in depositing their money in Switzerland or Singapore and receiving low returns on investment? I believe the money has been converted into productive assets in other places.'€
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Excerpts of key articles in the tax amnesty bill

Article 2: All taxpayers have the right to an amnesty except for those suspected of a tax crime and under investigation by the Attorney General'€™s Office (AGO) or who are currently on trial or serving prison time for a tax crime.

Article 4: Taxpayers who apply for an amnesty between January and March next year will have to pay 2 percent. The penalty will rise to 3 percent if the application is lodged between April and June, and 5 percent if between July and December.

In the explanation section, the penalty is calculated based on the margin resulting from the deduction in the net assets reported in the previous tax filing (SPT) with the current undeclared net assets.

Article 7: An amnesty is given to taxpayers who have a tax number (NPWP), have applied for the program, have paid the penalties and all incurred tax debts.

Article 8: The Finance Ministry is required to grant an amnesty within 30 working days after a taxpayer has fulfilled all requirements. A taxpayer automatically receives an amnesty if the ministry fails to issue confirmation within 30 working days.

Article 9
: Taxpayers who receive an amnesty will be exempt from paying administration penalties and from tax-crime prosecution. They will also receive a tax-debt free declaration for any tax declaration before Jan. 1, 2016.

Taxpayers who receive an amnesty will be exempt from paying higher taxes on their undeclared assets resulting from Supreme Court rulings, delayed payment penalties, tax filing revisions and reviews for tax declaration before Jan. 1, 2016.

Article 10: Data and information from applying for a tax amnesty cannot be used as a legal basis for a tax investigation and tax crime prosecution of any kind.

Article 21: Within one year of the amnesty implementation, the Finance Ministry is required to revise the General Tax Procedure Law, Income Tax Law, Value-Added Tax and Luxury Tax Law.
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