Indonesia «Rock Star» Leads Tax Crackdown

Sri Mulyani Indrawati, Indonesian finance minister

Sri Mulyani Indrawati, Indonesian finance minister

Indonesia is intent on getting back lost tax income to fund a widening budget gap. The island nation has tasked a tough-talking former World Bank executive with the job.

Sri Mulyani Indrawati was appointed finance minister of Indonesia last month. She has wasted little time in making tax dodgers and cheats her first priority.

«This is not a personal battle. This is really the need of the country to build the right reputation... to build a good and sound system,» Sri Mulyani said in an interview with «The Wall Street Journal», or WSJ.

Billions Needed

At the behest of reform-minded President Joko Widodo, she returned from Washington last month. Her first stint as finance minister of Indonesia, from 2005 to 2010, was marked by the tenacious pursuit of tax evaders and inept civil servants. 

Widodo needs immense sums to fund the constructions of roads, ports, railways, and other infrastructure. With his backing, Sri Mulyani looks to resume where she left off six years ago, when she enjoyed rock-star status.

Shutting Loopholes

«If we see some activity in the economy is actually thriving and there is no tax being paid by that activity, we will start enforcing – questioning first and then enforcing,» Sri Mulyani told the «The Wall Street Journal».

Much of her efforts are targeted at domestic issues such as closing loopholes, she indicated. «We are really trying to narrow or eliminate this room for them to try and play around,» referring to businesses in Indonesia.

Indonesian Tax Havens

Indonesia introduced the tax amnesty last month, hoping to see the repatriation of some 1,000 trillion rupiah (S$103.5 billion). Some observers worry that the money could move back offshore once a three-year holding period passes.

The island nation reportedly has defined two islands near Singapore as its own tax havens to prevent taxpayers from keeping their assets offshore – in Singapore, for example.

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