Update COVID-19 in Indonesia: 1,298,608 confirmed infections, 35,014 deaths (23 February 2021)
23 February 2021 (closed)
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Indonesia's House of Representatives and the government seem to agree that the Tax Amnesty Bill, a controversial proposal from the central government to make it attractive for (former) tax evaders to come clean and repatriate their funds to Indonesia, should come into effect soon, perhaps even as early as 1 July 2016. Indonesian lawmaker Supriyatno, who leads a parliamentary working group that discusses the bill, said all factions - except two - have reached a compromise on the Tax Amnesty Bill. A total of ten factions joined the discussions.
Supriyatno said the majority of Indonesian factions in parliament agree that the Tax Amnesty Bill should be effective up to 31 March 2017. However, there is yet to be reached an agreement about the special tax rates that are offered to those taxpayers who declare their offshore assets to Indonesian authorities. The income tax on these assets may be as low as 2.4 percent for those who declare their offshore wealth, while a 5 to 10 percent income tax may be imposed for those who are willing to repatriate their assets into the country. Indonesia's normal income tax rates go up as high as 25 percent.
Indonesia's financial authorities have also been preparing various investment instruments to absorb the potential large inflow of capital in the period ahead if the Tax Amnesty Bill is implemented. These investment instruments include low-risk, low-return time deposits to state-owned corporate bonds, state bonds, mutual funds, and real estate investment trusts (REIT). The funds are required to remain in Indonesia at least three years after repatriation, an official at Indonesia's Finance Ministry said. This requirement would really strengthen Indonesia's capital markets as well as the real sector. Moreover, the new bill will boost government revenue (between 70 and 80 percent of government revenue originates from taxes). This would "come in handy" for the Indonesian government as it is bound to experience another big shortfall in this year's state budget.
Earlier, Indonesia's Finance Ministry estimated that the Tax Amnesty Bill would bring in additional tax revenue worth around USD $4.4 billion this year. Meanwhile, the nation's central bank (Bank Indonesia) estimates that the bill can bring home about IDR 560 trillion (approx. USD $42 billion) in offshore assets and IDR 46 trillion (approx. USD $3.5 billion) in additional tax revenue. The Financial Services Authority (OJK) said there could be an additional USD $42 billion injected into local commercial banks before the year-end due to the repatriation of offshore funds. The OJK warned that if these funds cannot be distributed into productive assets by the banking sector, then it will lead to a significant rise in the cost of funds as liabilities pile up without returns.