The governor of Indonesia's central bank (Bank Indonesia), Agus Martowardojo, stated that he has become highly skeptical about the government's tax amnesty program that was launched in July. At a parliamentary hearing on Wednesday (07/09), Martowardojo said the central bank only expects to see IDR 21 billion (approx. USD $1.6 billion) in additional tax revenue through the amnesty program for the state and only USD $13.8 billion in repatriated funds. These new projections are significantly below the central bank's earlier projections.
Before the start of Indonesia's tax amnesty program in July 2016, Bank Indonesia estimated that the amnesty program would bring home about IDR 560 trillion (approx. USD $42.7 billion) in offshore assets and IDR 46 trillion (approx. USD $3.5 billion) in additional tax revenue. The weak start of the program has certainly made the central bankers decide to change their minds and take a much more conservative approach.
The Indonesian government targets to see IDR 165 trillion (approx. USD $12.5 billion) in additional tax revenue through the tax amnesty program. However, after one and a half month only IDR 7.05 trillion has been collected, implying that only 4.3 percent of the full target has been achieved (as per Thursday 8 September 2016).
Governor Agus Martowardojo's statements bring some pessimism, while in fact there occurred optimism over the past couple of days that the amnesty program would get some momentum after several big Indonesian businessmen threw their support behind the program.
Tax Amnesty Program Indonesia - Score So Far:
(in IDR trillion)
|Per 07 Sep '16
(in IDR trillion)
|Declaration of Funds||4,000.0||298.2||7.5%|
|Repatriation of Funds||1,000.0||15.3||1.5%|
Despite the statements of Martowardojo and the disappointing start of the program, Indonesian Finance Ministry Sri Mulyani Indrawati and Director General for Taxes Ken Dwijugiasteadi seem unwilling (for now) to change the program's target or extend the program by a couple of months.
Indonesia's tax amnesty program is a nine-month program (July 2016 - March 2017) that offers attractive tax rates to those Indonesian tax dodgers that are willing to declare previously undeclared assets (both at home or abroad) and - if desired - repatriate their offshore funds into Indonesia. This program will bring in additional tax revenue for the government, thus relieving pressures on the widening budget deficit (which is expected to reach 2.5 percent of the country's gross domestic product [GDP] in 2016), while fund repatriations into Indonesia's (financial) markets can be directed into structural development programs, such as infrastructure development.
Tax Amnesty Program Indonesia - Tax Tariffs:
|Declaration of Funds||1 July - 31 September 2016||4%|
|1 October - 31 December 2016||6%|
|1 January - 31 March 2017||10%|
|Repatriation of Funds||1 July - 31 September 2016||2%|
|1 October - 31 December 2016||3%|
|1 January - 31 March 2017||5%|
Source: Indonesian Finance Ministry