Indonesia to widen crackdown on tax evaders as amnesty ends today

JAKARTA — With Indonesia’s tax amnesty coming to an end, authorities are now setting their sights on those who did not participate and continue to evade taxes.

Officials plan to scrutinise credit-card data from banks and compare those with tax reports after the amnesty programme uncovered more than US$355 billion (S$495 billion) in previously undeclared assets.

While the participants in the amnesty would be “supervised”, the rich or large taxpayers who did not take part would pay a much heavier price, including penalties of as much as 200 per cent, said Mr Hestu Yoga Saksama, director for public relations at the Directorate-General of Taxation.

The amnesty programme, a key plank in President Joko Widodo’s push to boost revenue needed for ambitious spending plans, will end today, with the government already netting about 127 trillion rupiah (S$13.3 billion) in revenue. More than 800,000 participants declared 4,724 trillion rupiah of assets since the amnesty began in July.

Mr Widodo is banking on revenue from the amnesty to fund billions of dollars in infrastructure projects as South-east Asia’s biggest economy struggles to return to historic levels of economic growth.

The country’s economy expanded 5 per cent in 2016, well below the 7 per cent that Mr Widodo has targeted.

“The tax amnesty was a carrot, so they’ve got to use the stick, they’ve got to show that if you didn’t comply when we gave you a chance to do so, we’re going to hit you hard,” said Mr Wellian Wiranto, an economist at Oversea-Chinese Banking Corp in Singapore. “It would show that they take tax compliance seriously.”

The government had set a repatriation goal of 1,000 trillion rupiah, but only about 146 trillion rupiah was brought back. Singapore accounted for 84.5 trillion rupiah of that, followed by the Cayman Islands with 16.5 trillion rupiah and Hong Kong with 16.3 trillion rupiah, show ministry data.

While the amnesty was successful in terms of revenue raised and the number of participants, repatriations were disappointing, said Mr Yustinus Prastowo, executive director at the Centre for Indonesia Taxation Analysis in Jakarta. They were probably limited by the curbs on the avenues of investment under the programme, he said. “The government must be more creative to create other investment products and also tighten law enforcement, in order to draw the assets to Indonesia,” said Mr Prastowo.

Singapore was the chief location for assets held abroad, with 751.2 trillion rupiah, followed by the British Virgin Islands with 76.9 trillion rupiah and Hong Kong with 56.3 trillion rupiah, said Mr Suryo Utomo, special staff for tax compliance at the Finance Ministry. About 52.9 trillion rupiah was held in the Cayman Islands.

Indonesia has a low rate of tax compliance with only about 10 million filing tax returns in 2015 out of its 260 million people. Finance Minister Sri Mulyani Indrawati has said the success of the tax amnesty plan will help the government to increase the tax-to-gross-domestic-product ratio from 11 per cent. BLOOMBERG