Indonesian Tax Amnesty Makes Final Push for Overseas Assets
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To jump-start the recovery of assets that wealthy Indonesians sequester abroad, the country launched a tax amnesty program in the summer of 2016. It was an experiment that drew criticism from the likes of
The big question, once it wraps up on
Closing the deficit
"The revenue from this will significantly contribute to reducing the national deficit," said Asmiati Malik, an economics researcher at the
In recent weeks, regional tax offices have put on daily public campaigns to encourage participation in the amnesty program. Hestu Yoga Saksama of the
"In our culture, people tend to wait until the very last moment," said Yoga.
Over three million Indonesians have become new tax payers in the last year, according to the Directorate General of Taxation. This includes high profile business people like those of the Indonesian Chambers of Commerce and Industry, a business lobby, who signed up en masse earlier this year.
Since the 1990s, when there were ethnic riots and political unrest before and after the fall of long-time dictator Suharto, rich Indonesians have relocated money to tax havens like
"Two huge benefits of the amnesty program for taxpayers now are the low interest rate and the abolition of tax debt," said Yustinus Prastowo of the
If they repatriate assets, individuals will be charged between two and ten percent interest, rather than typical corporate or personal income tax rates, which can reach 30 percent. And they must commit to keeping those assets within
Expanding the tax base
"The major issue is that the number of taxpayers who joined the amnesty program is still low, proportionally," said Malik. "There are roughly 700,000 people who joined the program out of a total 32 million taxpayers... which is only 2.2 percent of those eligible."
Malik called for a more progressive tax policy to increase participation in both the amnesty program and taxation in general. "It should be more progressive regarding extensification [widening the tax base], and increase the incentive for tax compliance and avoidance," she said. "These solutions hinge on using 'one-gate identification' that integrates a person's bank account, national ID, and tax ID, so that no one can avoid declaring their assets."
That being said, the first round of the amnesty program is well-timed; by September of this year,
Rising inequality
The
Opponents of the program argue that tax evaders are essentially rewarded for flouting the law.
Last fall, there were large worker protests in
The
On Monday, the Directorate General of Taxation announced it was devoting "special attention" (http://www.thejakartapost.com/news/2017/03/27/tax-office-to-scrutinize-rich-indonesians-not-taking-part-in-tax-amnesty.html)to pursuing several members of a Forbes list of the richest Indonesians who have not yet registered for tax amnesty.
Prastowo suggested another reason why the funds may eventually fall short of their potential - the hardline rallies that gripped
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