14 June 2022 (closed)
Jakarta Composite Index (7,049.88) +54.44 +0.78%
USD/IDR (14,146) -6.00 -0.04%
EUR/IDR (17,335) +57.05 +0.33%
According to an Indonesian tax official, 149 taxpayers have already filed for Indonesia's tax amnesty program (which was launched on Monday 18 July 2016) at North Jakarta's Tax Office. Eleven have already settled their tax debt. However, spokesperson for the Directorate General of Taxation, Hestu Yoga Saksama, provided no information about the amount of tax revenue or repatriated funds that are involved. Saksama is optimistic that the government's target of seeing the repatriation of IDR 1,000 trillion (approx. USD $76 billion) worth of previously undeclared offshore assets into Indonesia will be achieved.
Saksama added that the government's call center (set up to answer questions about the tax amnesty program) has been busy throughout the day, a sign that people are interested to learn more information about the program. Indonesia's Tax Office has also created a webpage where people can keep track of tax declarations and inflows generated by the tax amnesty program (www.pajak.go.id/statistik-amnesti).
Indonesia's tax amnesty program, finally approved by the House of Representatives in late-June 2016, is designed to run for nine months: from 1 July 2016 to 31 March 2017. The main aim of the program is to boost Indonesia's tax revenue, hence relieving pressure on the government's budget deficit, and collect fresh funds for the government's spending programs (on infrastructure and social development).
The program makes it attractive - through tax incentives and impunity from prosecution - for (former) tax evaders to declare their offshore assets and - if wanted - repatriate these into Indonesia (where the assets need to stay for at least three years). The government and Indonesia's financial authorities have prepared several investment instruments in order to absorb possible excessive liquidity in Indonesia's financial markets due to the repatriation of these funds:
- Government bonds
- State-owned enterprises' bonds
- Corporate bonds
- Islamic bonds (Sukuk)
- Time deposits and savings at designated lenders
- Mutual funds
- Collective investment contracts
- Real estate investment trust (REIT)
- Property investment through a private equity scheme (RDPT).
A tax rate between 2 - 5 percent is imposed on repatriated assets within the July 2016 - March 2017 period. For those who declare their offshore funds before 30 September 2016 a 4 percent tax tariff applies. For those who declare their assets between 1 October and 31 December 2016, a 6 percent tax tariff applies. Lastly, for those who declare their assets between 1 January 2017 and 31 March 2017, a 10 percent tax tariff applies. For Indonesia's small and medium sized enterprises lower rates apply (between 0.5 - 2 percent).
Although the Indonesian government and various analysts (including those at Morgan Stanley and Moody's Investors Service) are optimistic that the tax amnesty program of Indonesia will be a success, there remains skepticism. In our opinion it is highly difficult to make an accurate estimation concerning the tax inflows and repatriated funds brought about by this program. A poll of Indonesia Investments shows that opinions among our audience are divided (although optimism has the upper hand):
Do you think that Indonesia's tax amnesty program will be a success?
Voting possible: -
- Yes, I do (50.6%)
- No, I don't (32.8%)
- I don't know (16.6%)
Total amount of votes: 2421
Indonesian President Joko Widodo previously said the program will reach is climax - in terms of tax declarations and repatriations - around September 2016. He estimates that some 6,500 Indonesians have parked assets offshore (usually in so-called tax havens). In fact, some USD $200 billion worth of Indonesian funds are estimated to be located in Singapore where some fund managers have started to worry about a possible outflow due to Indonesia's tax amnesty program, while other Singaporean wealth fund managers claim that tax amnesty programs rarely work exceptionally well and therefore there is no need for alarm.
Meanwhile, various legal activists in Indonesia, gathered in the One Justice Foundation (in Indonesian: Yayasan Satu Keadilan) and the Indonesian People's Struggle Union (in Indonesian: Serikat Perjuangan Rakyat Indonesia), have filed for a judicial review of Indonesia's tax amnesty bill at the Constitutional Court on claims that the program will turn money laundering practices into legal practices, it protects criminals, teaches (faithful) Indonesian citizens not to pay taxes, and - more generally - constitutes an unfair program from a social point of view. It is not expected that Indonesia's Constitutional court will reject the tax amnesty bill. If the bill indeed survives a judicial review, then it could, in fact, have a positive impact as legal certainty about the program rises.
It doesn't need to be a big success, I guess.... The government wants 1 quadrillion rupiahs in fund repatriation, but if they manage to get like 50% (only) of that target, it's already quite a lot...