Desperate for Tax Money, Indonesia Ready to Grant Criminals Amnesty

Jakarta Globe, Tabita Diela & Yosi Winosa,  Jun 05, 2015

An officer is seen serving tax payers at a tax office in Gambir in Jakarta
on April 2, 2015. (Antara Photo/Rosa Panggabean)

Jakarta. Indonesia plans to let corruptors, tax evaders, and forest and mining illegal poachers to put their money in government bonds, in a move that would reprieve criminals of their past crimes and provide government with additional revenue.

“We have reasons to study and throw this idea to the public. We have very limited data of Indonesians’ possessions and wealth abroad,” said Mekar Satria Utama, director of counseling, service and public relations with the director general of tax at the Finance Ministry on Friday.

“We heard there are 3,000 to 4,000 trillion rupiah [of Indonesians’ assets] in Singapore. That’s the potential,” Mekar said.

The tax directorate general said last week that the government is preparing a bill that will grant amnesty to criminals — except drugs offenders and terrorists — as long as they agree to bring in their ill-gotten money to Indonesia under the government’s terms and conditions. The government is targeting to complete the bill by October.

Mekar said the state plans to offer a remission for crimes such as corruption, money laundry, illegal logging and illegal mining.  Still, those offenders must pay bail of 10 percent to 15 percent of the value of their crime to the government. The offenders must shift some of their “investment portfolios and cash” into government bonds with maturities of five to 10 years, said Mekar.

The government had launched similiar tax remission programs in 1984 and 2004 but failed to attract any interests from offenders because they were not backed with a law that offered amnesty.

Tax experts see the government’s policy as a “paradox” and a “bad idea” as it would reduce taxpayers’ compliance in the future.

“It is such a controversy. It’s not fair for those who have been compliant [with the law]. When the policy is implemented, they will most likely become less obedient,” said Setyo Budiantoro, the director of Prakarsa, an economic policy research center.

Setyo encourages the government to engage more in country-to-country tax reporting and automatic information exchange.

“We need to improve taxpayer compliance first, then we deal with amnesty,” he said.

The government has waived penalties for five years on back taxes that tax payers must comply with by the end of this year, as part of efforts to boost revenue from taxes this year in order to fund ambitious development projects.

President Joko Widodo’s administration is targeting a tax-to-GDP ratio of 16 percent, up from 12 percent in 2013. Still, only 4 million Indonesians from the 250 million current population pay tax. Tax revenues — excluding revenue from customs — in the first quarter of 2015 reached Rp 198 trillion ($15 billion), compared to Rp 1,294 trillion for a full-year target.

GlobeAsia