Update COVID-19 in Indonesia: 1,542,516 confirmed infections, 41,977 deaths (6 April 2021)
14 April 2021 (closed)
USD/IDR (14,146) -6.00 -0.04%
EUR/IDR (17,335) +57.05 +0.33%
Jakarta Composite Index (6,050.28) +122.84 +2.07%
Indonesian Finance Minister Bambang Brodjonegoro is optimistic that the Tax Amnesty Bill can be turned into law at the next meeting with the House of Representatives (DPR). Although not all 27 articles of the Tax Amnesty Bill have been discussed yet among both institutions, the most crucial articles have been debated and the DPR seems to agree that the bill will raise the government's tax revenue. The government and DPR agree that deliberations should be completed by 28 July 2016.
In the first seven months Indonesia's Tax Amnesty Bill could bring back home up to IDR 1,000 trillion (approx. USD $76 billion) in funds according to government estimates. The bill is designed to make it attractive for tax evaders to come clean, declare and repatriate their funds into Indonesia. It is believed that a whopping IDR 11,450 trillion (approx. USD $867 billion) is parked outside the country secretly (this is nearly the same size as Indonesia's gross domestic product). The bill makes it more attractive for tax evaders to come clean because the income tax on these assets is cut to 2 percent (for the period that the Tax Amnesty Bill applies), whereas Indonesia's normal income tax rate goes up as high as 25 percent.
Based on information in local media, the Indonesian government wants the Tax Amnesty Bill to apply for a period of six months. However, the DPR proposes a 3 to 6 month extension (but with a higher tax tariff) in order to have more time to collect more funds.
The government says it guarantees that those who decide to declare their wealth through the bill will not need to be concerned about further consequences. It is mentioned in the draft that tax payers' data need to be kept a secret and cannot be used for law enforcement officers' investigations. Finance Minister Brodjonegoro added that there still exists a lack of understanding regarding the Tax Amnesty Bill. For example, many people think it is designed specifically for large companies. However, it will apply to all companies, from the small and medium enterprises to the big ones.
Repatriated funds need to stay within Indonesia (in specific investment instruments such as bonds, stocks, and deposit accounts) for at least three years. This way, the bill will strengthen Indonesia's capital markets as well as the real sector. It will also help to raise government revenue (between 70 and 80 percent of government revenue originates from taxation). The government is bound to experience another shortfall this year as government revenue is weak.
The Tax Amnesty Bill is also expected to improve Indonesia's tax base. Currently, Indonesia's tax-to-GDP ratio is very low at around 11 percent. This ratio is expected to rise because after having come clean, tax payers are believed to become loyal taxpayers. Indonesia has a population that numbers over 255 million people (and the adult population numbers about 185 million). However, there are only 27 million registered tax payers and only 10 million actually fulfill their tax obligations.
Meanwhile, Indonesia's Tax Office said it will probe the tax reports of 78 Indonesian individuals after finding differences between their wealth reports and data obtained from the so-called Panama Papers.