Indonesian Finance Minister Bambang Brodjonegoro. Source: Wikimedia
Jakarta has started to introduce its new tax amnesty programme as it seeks to boost tax revenues and fund ambitious infrastructure projects by encouraging the repatriation of investments.
“The tax office has started operations to service those who want to participate in the amnesty,” Finance Minister Bambang Brodjonegoro told the media.
The archipelago’s tax authorities say there are a series of data security measures to assure citizens that their financial information, submitted under the amnesty, will be protected.
Director-General of Taxes Ken Dwijugiasteadi said several “ring fences” had been installed, including using barcode technology to file data, as well as barring any recording devices from areas where tax information is accessed by officials.
“So while members of the public can monitor at any time the tax amnesty figure on a website, they cannot identify the participating taxpayers,” said Ken.
“The crucial point for the success of Indonesia’s new tax amnesty is how to ensure the information submitted by participants is kept in strict confidentiality.”
The government will impose a 2- to 5-per-cent tax for assets repatriated by next March. Assets must be kept in Indonesia for three years in funds managed by specific banks, and can be invested in government bonds or other designated areas.
Returning funds can be invested in state-issued securities, stocks, bonds and mutual funds issued by private firms, as well real estate.
Roni Bako, a tax analyst at Pelita Harapan University in Jakarta, said the expansion of the taxpayer base, coming with the declaration of assets, would be a significant by-product of the policy.
Indonesia had only around 28 million registered taxpayers out of its 240 million citizens including corporations, Bako explained.
Finance ministry spokesman Robert Pakpahan said 18 banks had met the qualifications to manage funds from the tax amnesty, compared with seven banks named last week.
The bank executives are expecting big gains from the amnesty. Bank Negara Indonesia boss Panji Irawan said it might receive up to 75 trillion rupiah (US$5.7 billion) and Bank Mandiri chief executive Kartika Wirjoatmodjo also said deposits “could be huge”.
Banks can manage the deposits through designated asset management firms and brokerage houses.
Some US$200 billion in Indonesian assets is thought to be invested offshore in Singapore where the extensive wealth management industry fears the new policy could hurt the island republic’s economy.
“This will have an impact and some Indonesian money will flow out of Singapore, but still a lot of money will remain offshore,” said an anonymous Singapore private banker. “I have not seen tax amnesties work exceptionally well in other centres so it is unclear how effective this one will be.”
Indonesia’s main stock index, JKSE, has risen 5 per cent and foreign investors have been net buying around 10 trillion rupiah (US$764 million) since it was enacted by MPs last month.