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Indonesia deprived of billions of dollars in tax income as firms shift profits abroad
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An employee counts US dollar bills at a money changer in Jakarta. Indonesia is believed to be missing out on billions of dollars in tax revenue as companies shift profits overseas. (Antara/Rivan Awal Lingga)
I
ndonesia is believed to be losing around one-tenth of would-be corporate tax revenue as companies reduce tax bills by shifting profits overseas.
Based on a recently published study, the state is estimated to have been deprived of at least US$2.47 billion in income as companies shifted more than $9.88 billion worth of profits to tax havens in 2018.
Equivalent to 11 percent of the country’s corporate tax revenue, that was a shade above the global average loss of 10 percent, the researchers behind the study found in August.
The amount of profits shifted to tax havens reportedly increased from around $7 billion in 2016 to almost $10 billion in 2018, causing deeper losses in tax revenue over time.
Singapore, Hong Kong, Bermuda, Caribbean islands and other tax havens are believed to be the main beneficiaries, followed by Switzerland and European Union tax havens, according to the researchers from the University of California at Berkeley and the University of Copenhagen, who have published their findings on the website missingprofits.world.
In the case of Indonesia, those findings are thought to reflect but a fraction of overall forgone tax income. According to a report published by the Tax Justice Network NGO in November 2020, the republic is missing out on more than $4.8 billion a year due in tax from corporations and high net worth individuals because of tax havens.
That number was equivalent to 42.92 percent of the healthcare budget or 14.09 percent of education spending, said the report, pointing to a chronic problem in the national tax system.
