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Today's Headlines Tax

  • Google & Indonesia Fail to Reach Tax Agreement in 2016

    Google & Indonesia Fail to Reach Tax Agreement in 2016

    US multinational technology company Google failed to reach a tax settlement with Indonesia's Tax Office in 2016 and therefore directors of Google Indonesia could risk a prison visit. In September 2016 Muhammad Hanif, Head of the Tax Office's Special Cases Department, said Google could face claims for five years of back taxes, including a bill of more than USD $418 million for full-year 2015 as the company is estimated to have paid less than 0.1 percent of the total income and value-added taxes it owed Indonesia in 2015. In Indonesia, Google generates income from online advertisement.

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  • 2nd Phase Indonesia's Tax Amnesty Program Ended, What's the Score?

    2nd Phase Indonesia's Tax Amnesty Program Ended, What's the Score?

    The second phase of Indonesia's tax amnesty program ended on 31 December 2016 and therefore it is interesting to take a look at the results during this phase. In short, results are mixed. We had already reported that in terms of asset declarations, the initial target of the program was already achieved a couple of weeks ago. However, in terms of asset repatriations (into Indonesia), the program has disappointed so far, and, unless the government will introduce new policies or incentives, will not achieve the target.

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  • Tax Amnesty Program of Indonesia is Constitutional, Says Court

    Tax Amnesty Program of Indonesia is Constitutional, Says Court

    Indonesia's Constitutional Court declared the government's tax amnesty program as "constitutional". In July 2016 a group of legal activists had filed for a judicial review of the central government's tax amnesty program on claims that the program would turn money laundering into a legal practice, would protect criminals, would teach Indonesian citizens not to pay taxes, and would generally constitute an unfair program from a social point of view. The court rejected these arguments.

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  • Tax Revenue Indonesia 2017: Another Shortfall Expected

    Tax Revenue Indonesia 2017: Another Shortfall Expected

    The last time Indonesia's tax revenue realization achieved the government's target was in 2008. In the following 8 years, a widening tax shortfall occurred as the government's tax revenue target rose more rapidly compared to tax revenue realization. In the 2017 State Budget Indonesia targets to collect IDR 1,498.9 trillion (approx. USD $111 billion) in tax revenue, while - based on the historic trend - tax revenue realization may only reach IDR 1,200 - 1,300 trillion, implying another big shortfall.

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  • Geothermal Exploration in Indonesia: Land Tax Removed

    Geothermal Exploration in Indonesia: Land Tax Removed

    In an attempt to attract investment in geothermal exploration in Indonesia, the central government decided to remove a land tax for companies that explore geothermal energy resources through a new decree. In 2017 this land tax will be scrapped for all companies that hold a geothermal business permit and are still in the exploration stage. According to information released on the website of Indonesia's Finance Ministry companies are entitled to a 100 percent tax reduction in land tax each year, for up to seven years.

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  • Alphabet's Google & Indonesia to Reach Tax Settlement Soon

    Alphabet's Google & Indonesia to Reach Tax Settlement Soon

    People familiar to the matter claim that US multinational technology firm Google will reach a tax settlement with the Indonesian government. Authorities in Indonesia have become increasingly uncomfortable with multinational companies that generate profit from an Indonesian online audience but lack a permanent presence in Indonesia in the form of a foreign investment company. This applies to various social media platforms as well as Google that only has a representative office in Indonesia, while transactions and revenue (generated in Indonesia) are booked at Google Inc's Asia Pacific headquarters in Singapore.

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  • Update Tax Amnesty Program Indonesia: Disappointing 2nd Phase

    Update Tax Amnesty Program Indonesia: Disappointing 2nd Phase

    The first phase of Indonesia's tax amnesty program was a success in terms of tax declarations and state revenue (penalties). Fund repatriations, on the other hand, were disappointing as - apparently - Indonesian tax payers find it not attractive enough to transfer these funds into Indonesian investment instruments or lack confidence in Indonesia's political and financial stability (perhaps still haunted by traumas from the Asian Financial Crisis in the late 1990s). However, Indonesian Finance Minister Sri Mulyani Indrawati remains optimistic that repatriations will rise soon now the winner of the US presidential election is known.

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  • Packaging Industry of Indonesia Still Under Pressure

    Packaging Industry of Indonesia Still Under Pressure

    Turnover in the packaging industry of Indonesia stood at around IDR 50 trillion (approx. USD $3.8 billion) in the first three quarters of 2016, flat from turnover generated in the same period one year earlier. Ariana Susanti, Director of Business Development at the Indonesian Packaging Federation (FPI), said turnover in the industry grew in Q1-2016 but was under pressure in the following two quarters. Overall, the situation is still better in 2016 compared to 2015 when - amid sliding economic growth and bleak purchasing power - turnover fell.

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  • Tax Amnesty Indonesia: Regulations for Asset Repatriations Eased

    Tax Amnesty Indonesia: Regulations Asset Repatriation Eased

    Indonesia's tax amnesty program, which was launched in July 2016 and will run until 31 March 2017, can be labeled a success. Up to 16 October 2016, a total of IDR 3,842.9 trillion (approx. USD $296 billion) worth of assets (either at home or abroad) have been declared to Indonesia's tax authorities nearly achieving the government's target of IDR 4,000 trillion. However, asset repatriations (from the so-called tax havens) are not a success, being far from the government's initial projection and therefore Indonesian authorities are now easing regulations.

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  • Update Indonesia's Tax Amnesty Program: 1st Phase Ended Successfully

    Update Indonesia's Tax Amnesty Program: 1st Phase Ended Successfully

    The first phase of Indonesia's tax amnesty program ended on Friday (30/09). Contrary to earlier forecasts the first phase of the program can be labeled a success. The Indonesian government collected IDR 97.2 trillion (approx. USD $7.5 billion) in additional tax revenue, or 58.9 percent of the nine-month program's full target (IDR 165 trillion). Indonesia's tax amnesty program, which runs up to 31 March 2017, is divided in three phases. In the first phase the government offered the most attractive tax tariffs to taxpayers who declare and/or repatriate their previously unreported assets.

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Latest Columns Tax

  • Weak Tax Revenue Indonesia in 1H-2016, Spotlight on Tax Amnesty

    Weak Tax Revenue Indonesia in 1H-2016, Spotlight on Tax Amnesty

    Indonesia's tax revenue realization in the first half of 2016 was disappointing. According to the latest data, Southeast Asia's largest economy collected a total of IDR 518.4 trillion (approx. USD $39.6 billion) worth of tax revenue (including customs and excise) in the first six months of 2016, down 3.3 percent (y/y) from tax revenue realization in the same period one year earlier, and only 33.7 percent of total targeted tax revenue (IDR 1,539.2 trillion) set in the revised 2016 State Budget. The disappointing performance is mainly due to weak tax income from the oil and gas sector.

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  • Tax Amnesty Program Indonesia: Investment Instruments II

    Tax Amnesty Program Indonesia: Investment Instruments II

    The government of Indonesia is preparing various investment instruments in order to absorb the (potentially large) inflow of capital following the launch of the tax amnesty program earlier this month. Besides government bonds, state-owned enterprises' bonds, real estate investment trusts (REITs), and property investment through private equity schemes (RDPTs), the government is also preparing trustees and zero coupon bonds. Without such investment instruments, bubbles are expected to appear due to the large inflow of funds into Indonesia's financial markets.

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  • Tax Amnesty Program Indonesia Launched: Which Investment Instruments?

    Tax Amnesty Program Indonesia Launched: Which Investment Instruments?

    Without giving too much insight into the details and regulations, Indonesian President Joko Widodo launched the tax amnesty program on Friday (01/07) during a speech in front of hundreds of businessmen and officials at Indonesia's tax office headquarters in Jakarta. The tax amnesty program - approved by the House of Representatives in late June - is a strategy to boost state tax income by (temporarily) granting amnesty as well as offering attractive incentives to (former) tax evaders. In return, the tax dodgers have to declare and (if wanted) repatriate their offshore assets into Indonesia.

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  • Indonesia's House Passes Tax Amnesty Bill & Revised State Budget

    In a plenary session on Tuesday (28/06), Indonesia's House of Representatives (DPR) passed the controversial Tax Amnesty Bill into law as well as the revised 2016 state budget. The Indonesian government will be relieved to see the Tax Amnesty Bill come into effect on 1 July 2016 (ending in May 2017) as it expects the bill to boost tax revenue this year by IDR 165 trillion (approx. USD $12.4 billion). Through tax incentives and the pardoning of tax crimes, the tax amnesty program makes it attractive for tax evaders to declare their offshore assets and repatriate these into Indonesia.

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  • Reforming Indonesia's Tax System is Key to Unlock S&P's Investment Grade

    Reforming Indonesia's Tax System is Key to Unlock S&P's Investment Grade

    In the past two weeks, two of the big international credit rating agencies released new reports about Indonesia's fiscal situation. Both agencies affirmed Indonesia's sovereign debt rating: Fitch Ratings kept Indonesia at BBB-/stable (investment grade class) and Standard & Poor's (S&P) maintained Indonesia at BB+/positive (highest junk level, one notch below investment grade). S&P's decision to keep Indonesia within the junk level category was met with disappointment among investors and Indonesian government officials but perhaps not that surprisingly.

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  • Fiscal Update Indonesia: Government Wants to Revise 2016 State Budget

    Fiscal Update Indonesia: Government Wants to Revise 2016 State Budget

    The government of Indonesia proposes to cut the state revenue target by IDR 88 trillion (approx. USD $6.5 billion) in the Revised 2016 State Budget. Indonesian Finance Minister Bambang Brodjonegoro announced the government has sent the proposal to the House of Representatives’ Budget Committee (Banggar) on Thursday (02/06). Expectations of lower government revenue is the result of weaker-than-estimated tax collection, the lower-than-initially-assumed Indonesian crude oil price as well as the lower-than- estimated oil and gas production in Indonesia.

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  • Government Revenue Collection Indonesia at 23% of 2016 Target in Early May

    Government Revenue Collection Indonesia at 23% of 2016 Target in Early May

    So far this year, realization of government revenue in Indonesia (up to 8 May 2016) has reached IDR 419.2 trillion (approx. USD $32 billion), roughly 23 percent of the full-year revenue target in 2016 (IDR 1,822.5 trillion). This result is weaker compared to last year when the government collected IDR 476.3 trillion in the period 1 January - 15 May 2015, or 27 percent of the full-year target. Meanwhile, government spending reached IDR 586.8 trillion between 1 January and 8 May 2016, or 28 percent of the full-year target (IDR 2,095.7 trillion), roughly the same as government spending during the same period last year.

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  • Tax System Indonesia: Plans to Cut Corporate Income Tax to 20%

    Tax System Indonesia: Plans to Cut Corporate Income Tax to 20%

    More changes to Indonesia's tax system are in the pipeline. Today (11/04), Indonesia's Finance Minister Bambang Brodjonegoro said Southeast Asia's largest economy plans to cut the corporate income tax rate to 20 percent this year (from 25 percent currently). According to Brodjonegoro a 20 percent corporate tax rate is more competitive and will attract investment. Indonesia's finance minister expressed this plan in a meeting with the nation's parliamentary commission overseeing taxes (an income tax rate cut requires parliamentary approval).

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  • Indonesia Does Not Revise 2016 Tax Revenue Target, Realistic or Not?

    Indonesia Does Not Revise 2016 Tax Revenue Target, Realistic or Not?

    Indonesia's Finance Ministry said it will not revise the tax revenue target set in the 2016 State Budget. The Indonesian government targets to collect IDR 1,360.2 trillion (approx. USD $100 billion) worth of tax revenue in 2016, a 28.9 percent rise from tax revenue realization in 2015. However, although it is good to aim high - hence setting an ambitious target - it is also important to be realistic (to avoid budgetary turmoil and gain fiscal credibility, important for Indonesia to be eligible for a credit rating upgrade). How realistic is Indonesia's 2016 tax revenue target?

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  • Infrastructure Development Indonesia: Gaining Momentum in 2016

    Infrastructure Development Indonesia: Gaining Momentum in 2016

    After having grown rapidly in the years 2010-2013, infrastructure development in Indonesia lost its momentum in 2014. This was due to limited available government funds, uncertainty caused by the legislative and presidential elections, and the nation's slowing economic growth. After Joko Widodo became Indonesia's seventh president in October 2014, it was expected that infrastructure development would revive. However, it didn't. But Widodo made one important move by seriously reducing energy subsidies, hence making more funds available for infrastructure development.

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