A plan to offer an amnesty to recalcitrant taxpayers with the hope of triggering a repatriation of Indonesian assets kept overseas has strayed away from its initial intentions as the draft bill indicates that it will likely only profit a few.
The Finance Ministry and the House of Representatives earlier boasted that the planned amnesty will bring home billions of dollars in financial assets parked overseas by members of Indonesian conglomerates.
However, a draft bill on the tax amnesty, a copy of which was recently obtained by The Jakarta Post, includes no mention of repatriation measures nor any policy providing any incentives to lure funds back to the country.
The only incentives provided are penalties of between 2 and 5 percent on tax arrears that evaders are required to pay if they report undeclared assets in a certain period of time.
Tax evaders will also be immune to possible criminal prosecution, as well as to administrative penalties on their declared assets.
“Questions will arise about whether the penalties paid by our tax evaders have fulfilled the public’s sense of justice,” said House Legislation Body (Baleg) member Arif Wibowo of the ruling Indonesian Democratic Party of Struggle (PDI-P).
“The public has problems understanding the connection between the government’s need to expand its tax revenues and the planned pardon for recalcitrant taxpayers,” he said.
Indonesia slaps income tax of as much as 25 percent on companies and 30 percent on individuals.
Indonesia’s version of amnesty is more lenient than that of Argentina, which also plans to implement a similar policy next year amid a shortage of dollars and a decrease of its foreign currency reserves.
Argentina will impose a penalty of between 3 and 6.5 percent tax on those who bring their cash back to the country.
The specific tax rate in Argentina will depend on what will be done with the assets back home instead of being tied to a specific period of time like those introduced in Indonesia. In Argentina, for example, those who repatriate funds to buy government bonds will have to pay only 3 percent tax.
Indonesia’s amnesty plan was announced by Finance Minister Bambang Brodjonegoro in June mainly as an opportunity to attract back more than US$300 billion in Indonesian assets, particularly from Singapore, and “lock them here” to generate jobs and bolster economic activities.
The plan, initially engineered by the Golkar Party, is also aimed at providing the cash-strapped administration with higher tax revenues to realize large-scale infrastructure projects next year. This year’s tax revenue collection is estimated to reach less than 90 percent of the target.
The House later took the lead in drafting the bill along with officials from the Finance Ministry’s directorate general of taxation.
However, along the way, Coordinating Political, Legal and Security Affairs Minister Luhut Pandjaitan also assumed a major role in drafting the bill, taking over the lead from the Finance Ministry and the Office of the Coordinating Economic Minister.
Luhut has repeatedly said that repatriation is not high on the amnesty agenda. “There is no obligation to repatriate our funds through the amnesty,” Luhut, Indonesia’s former ambassador to Singapore, said recently.
Last week, the Baleg decided to relinquish the drafting of the amnesty bill entirely to the government and it expected the draft to be submitted to the House for joint deliberation this month in order to be approved by the end of the year.
Several politicians have said that the amnesty will only benefit a few bigwigs, such as Golkar chairman Aburizal Bakrie, whose firms are experiencing tax problems.
“The subject of the amnesty individuals who refuse to comply with the regulations. Only problematic people will benefit from such a scheme. I don’t see any benefit for the public in general,” said Baleg member Khatibul Umam Wiranu of the Democratic Party.
Baleg member Misbakhun of Golkar, however, said that the focus should not be on repatriation, but on the potential tax revenues gained from the productive Indonesian assets invested overseas.
“Productive overseas assets should remain there so that we can receive taxes from the assets. The impact will be huge to our revenue stream,” said the former tax official.
He also said that there was also no need to expect cash deposited overseas to return because much of it had been used as collateral for investments and on productive activities elsewhere. “Tell me whether in this age people are still interested in depositing their money in Switzerland or Singapore and receiving low returns on investment? I believe the money has been converted into productive assets in other places.”
Sumber : The Jakarta Post (1 December 2015)