Which Bank Accounts Are Checked by Indonesia's Tax Authorities?
There exists some resistance against the Indonesian government's recently announced regulation that gives tax authorities access to information on accounts held at financial institutions, including bank accounts. The regulation aims to contribute to a more transparent financial system as well as to boost the government's tax revenue realization (tax evaders will need to be more careful now authorities can monitor private and corporate bank accounts).
Earlier, Indonesian Finance Minister Sri Mulyani Indrawati said Indonesia's Tax Office will not be interested in any small accounts. This is in line with 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.
However, according to the latest reports, Indonesia set the threshold at IDR 200 million (approx. USD $15,000), a very low threshold that gives rise to a number of problems.
Firstly, Yustinus Prastowo, Executive Director of the Center for Indonesian Taxation Analysis, said the low threshold gives the impression that authorities are targeting the country's middle class. There are about 2.3 million bank accounts in Indonesia that contain at least IDR 200 million. Most of these accounts are held by Indonesia's middle class. Psychologically, this can be a major source of resentment among the middle class in a country that is plagued by a very high degree of income distribution inequality (the richest one percent of society own a large chunk of the economy). Prastowo would therefore advise the government to set the threshold in the range of IDR 500 million to IDR 1 billion.
Secondly, a low threshold would imply there are too many bank accounts that need to be checked by authorities and it can therefore result in a reduced focus of tax officers, while costs increase.
Thirdly, the low threshold may cause problems - or at least confusion - for the country's small and medium-sized entrepreneurs. Usually, this group does not use a corporate bank account but a private one for their business activities (simply because they never established a company).
Meanwhile, there is no threshold for corporate accounts, implying that the tax authorities can check whether all companies are fulfilling their tax obligations (based on their corporate bank accounts).
Thresholds & Regulations Set in PMK No. 70/PMK.03/2017
International
• Corporate and individual tax payers are required to report foreign bank accounts that were opened before 1 July 2017 and have more than USD $250,000 (or the equivalent in local currency) worth of funds
• Corporate and individual tax payers are required to report foreign bank accounts that were opened after 1 July 2017
Domestic
• There is no threshold for corporate bank accounts
• The threshold for individual (personal) bank accounts, insurance or cooperation is set at IDR 200 million
• There is no threshold for accounts related to the capital markets and commodity trading
Reporting Mechanism
• Before 1 August (every year), financial institutions that are supervised by the Financial Services Authority (OJK) need to report the accounts.
• Those financial institutions that are not supervised by the OJK need to report the accounts before 30 April (every year).