Indonesia Passes Law to Chase Tax Evaders Overseas

  • New law to fulfill requirements under OCED’s AEOI framework
  • Move could unlock billions of dollars of assets kept abroad

The law paves the way to ramp up tax collection by getting better access to information on any assets parked in jurisdictions such as Singapore and Hong Kong.

Photographer: Sanjit Das/Bloomberg

Indonesia moved a step closer to hunting down tens of billions of dollars it believes its citizens have hidden abroad after political parties agreed to seek a parliamentary approval for a law that will give tax officials access to financial data held by other countries.

A meeting of various political parties on Wednesday agreed to seek the parliament approval to turn an emergency rule in lieu of law, known as perpu, into a law at a plenary session on Thursday, said Johnny G. Plate, a lawmaker and member of Commission XI. The law will fulfill a requirement for Indonesia to participate under the Organisation for Economic Co-operation and Development’s Automatic Exchange of Information framework.

The law will pave the way for Southeast Asia’s biggest economy to ramp up tax collection by getting better access to information on any assets parked in jurisdictions such as Singapore and Hong Kong. While a tax amnesty launched last year uncovered more than $360 billion, Finance Minister Sri Mulyani Indrawati has estimated another 185 trillion rupiah in tax revenue could be unlocked under the AEOI framework. Indonesia, which has a poor tax collection rate, has been facing a fiscal shortfall and needs to shore up revenue to fund an ambitious infrastructure program.

Singapore’s Finance Ministry said this month it was ready to exchange data with Indonesia after signing a Multilateral Competent Authority Agreement in June, avoiding the need for a separate bilateral deal. The exchange can begin after relevant countries implement necessary laws, join a global agreement on tax disclosures, and put in place safeguards on confidentiality and data protection, the ministry said.

Most of the assets declared under Indonesia’s tax amnesty, which ended in March, were found to be in Singapore, according to the Finance Ministry in Jakarta. Indonesia is working to improve its tax collection resources, including the quality and number of officials, as well as data protection, according to Suahasil Nazara, head of fiscal policy at the ministry.

(Lawmaker clarfies parliament yet to approve decree as law.)
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