Indonesia has passed a tax amnesty bill into law in a move which should help the government gain additional tax revenue by pardoning tax dodgers. Is the government too optimistic with its targets?
The amnesty program, which will come into effect from July 2016 and run through to May 2017, will pardon tax crime on all back taxes and tax fines as long as tax payer's declare their hidden assets and agree to pay special fee to the government.
The new amnesty bill sets a penalty of 4 percent to 10 percent on individuals who report assets held abroad but decline to repatriate the funds. Participants must keep the funds onshore for three years. However the «Jakarta Post» reports that not everyone is happy about the new arrangements.
Tax Crackdown
The amnesty has been a hot topic among Indonesia's wealthy, Falcon private banking head Erich Pfister confirmed to finews.ch. This is presumably at least in part because Indonesia is cracking down on tax offenders: officials in the country are looking into the tax situation of 78 citizens who were named as part of the «Panama Papers» leaks.
«This law will not pardon any crime outside the taxation matter,» Finance Minister Bambang Brodjonegoro said after the plenary meeting.
Hoarded Offshore
The Finance Ministry has expected tax amnesty program would encourage Indonesians to declare in the region of $303 billion stashed abroad. This would allow the government of President Joko Widodo to underpin and maintain its current levels of spending.
There are concerns though that the government is being overly optimistic with its target. Estimates of those undeclared assets vary widely. And it remains uncertain how accommodating companies or individuals will be to the tax amnesty.
