Indonesian Tax Amnesty's First Phase Is Over, Beats Expectations - Media

Tom Burroughes Group Editor Singapore 4 October 2016

Indonesian Tax Amnesty's First Phase Is Over, Beats Expectations - Media

The first leg of the tax amnesty programme has brought in more revenue than had been expected, reports said.

Adoption of Indonesia's tax amnesty programme ran ahead of expectations ahead of the final day - 30 September - of the first phase of the operation, according to media reports.

The first phase of the programme was the period in which the most generous - or lenient - terms were offered to those taking advantage of the amnesty. Reports said that as of late last week IDR96.4 trillion (around $10.1 trillion) had been collected in revenue, which equates to about 60 per cent of the government's target.

The amnesty programme, which kicked in this summer, is seen as putting the jurisdiction of Singapore, which has been home to considerable amounts of offshore wealth from places such as Indonesia, under pressure. The move is also likely to see more international banks seek to create onshore booking centres in Indonesia.

Jurisdictions around the world, such as Brazil, the UK and Italy, have amnesty programmes in place or have concluded them in recent years. 

Governments are seeking to stem outflows of revenues to shore up their public finances. A sticking point in some countries is that holders of offshore accounts are as concerned for their privacy and security as they are about avoiding tax, a point made in reference to amnesties as organised by Brazil, for example. (See article here in WealthBriefing, sister news service to this one.)

Tax rates in the second phase are up to 2 percentage points higher than in the first phase of the Indonesian programme.

The Straits Times (of Singapore) reported, citing officials, that some 341,110 taxpayers have signed up, including 15,000 new taxpayers, under the programme.

The rate for those who repatriate their assets goes up by 1 percentage point to 3 per cent from 1 October, and to 5 per cent during the last phase which ends next March. For assets declared but not repatriated, a rate of 6 per cent will now apply and then 10 per cent in phase three.

Reports have said that Indonesia is seeking to create incentives of its own to encourage taxpayers to invest in the country. See here.

There have been concerns for some time that when some countries seek data about their citizens’ offshore accounts, they may be unreliable custodians of such information. In 2010, the Society of Trust and Estate Practitioners (STEP), flagged this concern in a policy paper. STEP said it was concerned about a “major flaw” in the tax information exchange agreements as framed by the Organisation for Economic Co-operation and Development (OECD).

“Without fresh safeguards, the result could be detailed data on individuals being provided to countries with poor records in areas such as respect for human rights or protecting personal data from abuse. This reflects a major flaw in the current OECD peer review process for TIEAs – the review process only examines a country’s ability to deliver tax information,” STEP said at the time.

Last August, the OECD issued a paper on voluntary disclosure programmes, tracking 47 jurisdictions’ schemes. While it noted that there are similarities in how programmes work, there are also “striking” differences between the penalties imposed: in some countries, monetary penalties are well below half of the unpaid tax while in a large number of countries the maximum penalty can be as high as (or even above) double the amount of undeclared income. Another noteworthy fact from the OECD study is that 19 out of the 47 countries tracked cut the monetary penalties to nil following a voluntary disclosure by the taxpayer.


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