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Information-sharing helps Indonesia catch tax evaders but may deter investors
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Directorate General of Taxation spokesman Hestu Yoga Saksama (tribunnews.com/Seno)
I
ndonesia plans to use data from the international Automatic Exchange of Information (AEOI) system to nab tax evaders hiding undeclared income and assets in overseas tax havens. But in the process, experts warn, the country may deter much-needed foreign direct investment.
Ninety-eight countries have shared data with Indonesia about the overseas financial accounts of Indonesian residents — citizens and foreigners working in Indonesia who are here for more than 183 days a year or who intend to settle in the country. Included in the list are six territories that are major tax havens for Indonesians — Australia, China, the British Virgin Islands, the Cayman Islands, Hong Kong and Singapore.
The Directorate General of Taxation is still processing the data, according to its spokesman Hestu Yoga Saksama.
The authority is working to identify the beneficial owners of overseas financial accounts. Some accounts may be in one person’s name on paper but in practice benefits another, who is known as the beneficial owner. This process has already taken the tax office at least five months.
By comparing the income declared on tax returns with a person’s account balance, the tax office can determine if they might be guilty of tax evasion.
“That kind of information will be very important to increase taxpayer compliance,” Hestu said in a recent interview with The Jakarta Post. “They understand that [the Directorate General of Taxation] has their data, so they will change their behavior. They will think twice about evading taxes.”
A major challenge in Indonesia’s tax reform is to ensure the crackdown on tax evasion does not deter investors and businesses from investing in Indonesia.
