The Strategist

Indonesia is planning a large-scale tax amnesty


04/13/2016 - 17:10



What an ideal tax amnesty should look like? Some are opposed to it in principle, as it is, in their view, rewards those who broke the law. Others believe that maximum revenues should be the main goal.



pixabay.com
pixabay.com
The Organization for Economic Cooperation and Development (OECD), taking into account both positions, offered an amnesty, which would become less expensive for the tax evaders, than if they had been caught by the authorities. However, if law-abiding citizens would find it more expensive. At the same time, hardly anybody pays much attention to an Indonesian formula.

According to the government's assessment, the rich Indonesians are hiding abroad about $ 900 billion. Authorities are ready to offer amnesty to return at least part of the money (the bill should soon be considered in the Parliament).

Its essence is as follows: people who hide assets outside Indonesia would not face prosecution or a fine, but only a fixed fee of 1% to 6% of the value of hidden assets. The amount of commission depends on speed and quickness of the declaration of money repatriation.

Even 6% (maximum limit) would an excellent figure, since Indonesia has 30% standard tax rate. The defaulters should consider the amnesty as an invitation to "invest their money in the Indonesian economy," explained Finance Minister Bambang Brodjonegoro.

The Indonesian government expects to benefit from the amnesty $ 8 - $ 15 billion in revenue.

Everyone agree that Indonesia has serious problems with tax collection. Only 27 million people of the 255 million population are registered taxpayers; at that, there was only 900 thousand of them in 2014. Last year, Indonesia has collected 82% of the projected amount of tax revenue.

The country’s ratio of tax to GDP is about 10% compared to 13-15% for the neighbors in Southeast Asia. Indonesian President Joko Widodo wants to raise this ratio to 16%. It should also be noted that the Indonesian constitution limits the 3% budget deficit, and the government is doing everything to stay away from this boundary.

Starting from next year, all jurisdictions, including Singapore, Hong Kong, Switzerland and Mauritius (where Indonesians are also supposed to hide their money) have agreed to report about foreign holders of accounts to their home countries. The agreement was reached within the OECD scheme of "a single standard for the exchange of tax information" 

Some experts were surprised by the relatively small size of fixed commission for money repatriation. Nicholas Shaxson of the Tax Justice Network suggests that "most likely, powerful people in Indonesia have done everything so that information about their money would not to become public and they themselves would not be persecuted by the law."

Another possible explanation may be the speed. According to Mr. Brodjonegoro, if the government waits for the full realization of "Uniform Standard for the exchange of tax information", the revenue from the tax fees will come in only by the beginning of 2019, or at the end of the current administration’s term.

source: economist.com




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