Photographer: Dimas Ardian/Bloomberg

Indonesia to Widen Crackdown on Tax Cheats as Amnesty Closes

  • Amnesty unearths $355 billion of assets previously undeclared
  • Government set for $9.5 billion windfall from tax penalties

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

Officials plan to scrutinize credit-card data from banks and compare those with tax reports after the amnesty program uncovered more than $355 billion in previously undeclared assets. While the participants in the amnesty would be “supervised,” the rich or large taxpayers who didn’t take part would pay a much heavier price, including penalties of as much as 200 percent, Hestu Yoga Saksama, director for public relations at the Directorate General of Taxation, told reporters in Jakarta on Wednesday.

The amnesty program, a key plank in President Joko Widodo’s push to boost revenue needed to fund ambitious spending plans, will end Friday with the government already netting about 127 trillion rupiah ($9.5 billion) in revenue. More than 800,000 participants declared 4,724 trillion rupiah of assets since the amnesty began in July, with Singapore topping the list of countries where Indonesians stashed money, according to the Finance Ministry.

Widodo, known as Jokowi, is banking on revenue from the amnesty to fund billions of dollars in infrastructure projects as Southeast Asia’s biggest economy struggles to return to historic levels of economic growth. The country’s economy expanded 5 percent in 2016, well below the 7 percent that Jokowi has targeted.

“The tax amnesty was a carrot, so they’ve got to use the stick, they 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 Wellian Wiranto, an economist at Oversea-Chinese Banking Corp. in Singapore. “It would show that they take tax compliance seriously.”

Hong Kong, Cayman Islands

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 Cayman Islands with 16.5 trillion rupiah and Hong Kong with 16.3 trillion rupiah, ministry data show.

While the amnesty was successful in terms of revenue raised and the number of participants, repatriations were disappointing, said Yustinus Prastowo, executive director at the Center for Indonesia Taxation Analysis in Jakarta. They were probably limited by the curbs on the avenues of investment under the program, 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,” Prastowo said.

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 Suryo Utomo, special staff for tax compliance at the Finance Ministry. About 52.9 trillion rupiah was held in the Cayman Islands and about 41.2 trillion rupiah in Australia.

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 percent .

— With assistance by Yudith Ho

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