Indonesia says it is prepared to take on Singapore over tax amnesty scheme

JAKARTA — Indonesia has said it is prepared to take on Singapore as it attempts to recover millions stashed by Indonesian citizens overseas via a tax amnesty programme, after media reports accused Singaporean banks of imposing hurdles by allegedly luring Indonesian customers with a special scheme to leave their assets in the city state instead of repatriating them.

“Every country wants to survive,” Vice-President Jusuf Kalla told reporters on Thursday (July 21). “It (only) proves what people always say that most of the money stashed in Singapore comes from Indonesia.”

Minister of Finance Bambang Brodjonegoro said he is not afraid of the move by the Singaporean banks. “Just let it be, I am not afraid of Singapore which is just a small country like that,” he told Indonesian media on Tuesday.

Indonesian House of Representatives Speaker Ade Komarudin urged the Singapore Government not to thwart the tax amnesty programme.

“I want to remind Singapore to put away the policy and I hope that (news about the incentive by banks) are not true, because it will very much obstruct the success of the Tax Amnesty Law”, he said.

“We’ve been friends for a long-time, don’t ruin it for your ego”, he said.

The Indonesia’s Parliament last month passed a tax amnesty law aimed at drawing billions from wealthy Indonesians abroad and from tax evaders at home to help finance infrastructure and boost economic growth.

The law, which kicked in on July 18, grants special personal income tax rates to tax evaders who declare their past earnings between this month and next March. People and companies that declare their earnings and pay the special taxes will not be penalised for having failed to declare them before. Indonesia, a country of more than 250 million people, has only about 30 million registered taxpayers.

Under the amnesty, tax rates will range from two to 10 per cent, depending on how quickly an individual declares his assets and whether the capital is repatriated to Indonesia.

Mr Brodjonegoro had said the amnesty is expected to draw about 165 trillion rupiah (S$16.9 billion) for the government.

It was reported in Indonesian media that Singaporean banks have offered to pay the tariff difference — four per cent versus two per cent — between declaring the assets and not repatriating them to Indonesia between July and September.

Mr Yustinus Prastowo, the executive director of Centre for Indonesia Taxation Analysis, told the Jakarta Globe he had heard about the offer first-hand from Indonesian businesspeople who have been approached personally by private agents.

“This type of incentive is legal and the Indonesian government must be ready to face it,” Mr Prastowo said.

Mr Robin Heng, the Global Market Head for Indonesia and Philippines of the Bank of Singapore the private banking arm of OCBC, told TODAY: “Bank of Singapore will not be paying the tariff difference of two per cent for clients in order to keep their funds in Singapore.”

“It is not appropriate for us to do so,” Mr Heng added. The other banks contacted did not comment by press time. AGENCIES WITH ADDITIONAL REPORTING BY RUMI HARDASMALANI