hat was once feared by bank customers has become a reality with the issuance of a regulation that opens up a wide door for tax officials to scrutinize banking data.
The government issued on Tuesday a regulation in lieu of law (Perppu) on financial information access for taxation purposes.
A Perppu is the equivalent of a law and can be issued in urgent cases. It comes into effect immediately, but the House of Representatives still has the power to review it at a later date.
In this case, the government has argued that the Perppu’s issuance is crucial to “trump” the existing Banking Law and General taxation System (KUP) Law, which guarantee banking secrecy, so that Indonesia can comply with the global implementation of the Automatic Exchange of Information (AEOI).
Without the Perppu, Indonesia would have to revise the Banking Law and KUP Law — a process that could take months, if not years, at the House — and all other supporting laws. Indonesia, however, has already expressed its commitment to put the AEOI into effect by 2018 at the latest.
The AEOI is promoted by the Organization for Economic Cooperation and Development (OECD) as a systematic and periodic transfer of taxpayer information from source countries where a taxpayer receives income to their countries of residence, where individuals reside and where firms are incorporated.
Tax authorities in residence countries can then analyze transmitted data in the AEOI and, if necessary, undertake law enforcement activities to ensure that taxpayers have met their obligations properly.
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