Update COVID-19 in Indonesia: 927,380 confirmed infections, 26,590 deaths (19 January 2021)
19 January 2021 (closed)
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The government of Indonesia listened to the criticism that emerged after it decided to set a rather low threshold for bank accounts that are to become subject to the automatic bank information exchange program. Through Finance Ministry regulation PMK No. 70/PMK.03/2017 Indonesia's tax authorities obtain access to information on accounts held at financial institutions, including bank accounts. This new regulation makes it possible to check whether tax payers indeed fulfill their tax obligations.
Under this law, financial institutions need to give access of clients' accounts to Indonesia's Tax Office. However, it only involves those accounts that meet specific criteria set in PMK No. 70/PMK.03/2017. Initially the Finance Ministry decided to set the threshold at IDR 200 million (approx. USD $15,000), implying Indonesia's Tax Office would have access to all accounts that have more than IDR 200 million worth of funds stored on them.
However, this low threshold was reason for criticism. Firstly, Yustinus Prastowo, Executive Director of the Center for Indonesian Taxation Analysis, said the low threshold would give the impression that authorities are targeting the country's middle class. Secondly, a low threshold would imply there are simply too many bank accounts on tax authorities' radar. This could result in a reduced focus of tax officers, while costs increase. Thirdly, a low threshold would cause problems - or at least confusion - for Indonesia's small and medium-sized entrepreneurs. Most of them do not use a corporate bank account but a private one for their business activities (simply because they never established a company). Moreover, there is no threshold for corporate accounts, implying tax authorities can check whether all companies are fulfilling their tax obligations.
In a statement - made earlier this week - the Finance Ministry announced it has now revised the minimum threshold for bank accounts to be subject to automatic bank information exchange to IDR 1 billion (approx. USD $75,000) as this would ease the burden of small local businesses and simplify banking administration. There are about 496,000 savings accounts with a balance above IDR 1 billion in Indonesia.
The end of banking secrecy in Indonesia is part of the OECD's Automatic Exchange of Information (AEOI), which was also signed by Indonesia. The AEOI is an initiative for tax information exchange among 100 jurisdictions designed to reign in tax evasion across the world. Other nations that are part of the AEOI agreed to automatically report data of accounts that contain more than USD $250,000, or the equivalent in local currency, to the local tax authorities. However, each nation is free to determine the threshold for domestic bank accounts held by domestic citizens.