Indonesia pledges to guard citizens' financial data

A man farms on a river bank before the city skyline in Jakarta. Indonesia launched a tax amnesty in a bid to give Southeast Asia’s top economy a multi-billion-dollar boost, defying criticism the move will let evaders off the hook.
A man farms on a river bank before the city skyline in Jakarta. Indonesia launched a tax amnesty in a bid to give Southeast Asia’s top economy a multi-billion-dollar boost, defying criticism the move will let evaders off the hook.PHOTO: AFP

Security measures set up to encourage more people to declare untaxed assets under new tax amnesty scheme

The Indonesian tax authorities have in place a series of data security measures to assure citizens that their financial information, submitted under the new tax amnesty scheme, will be protected.

Director-General of Taxes Ken Dwijugiasteadi told The Straits Times in an interview on Sunday that several "ring fences" have been installed so that details of asset declarations by tax payers stay private.

These include using barcode technology to file their data, as well as barring smartphones and other electronic devices with recording capabilities from areas where tax information is accessed by officials.

The barcode, for instance, cannot be read unless one is logged into the system of the tax directorate, whose data servers are housed in an undisclosed location outside Java.

"So while members of the public can monitor at any time the tax amnesty figure on a website, they cannot identify the participating tax payers," said Mr Ken.

The cloak-and-dagger manner in which the data is being handled is necessary to encourage the rich, who are used to tight banking secrecy rules overseas, to come clean on their wealth, he said.

"The crucial point for the success of Indonesia's new tax amnesty is how to ensure the information submitted by participants is kept in strict confidentiality."

President Joko Widodo has also warned that anyone who leaks the information submitted by tax payers under the scheme will face a five-year jail term.

The tax amnesty scheme, which kicked in yesterday, was introduced to help Indonesia recover billions of dollars in revenue lost to widespread tax evasion and in assets hidden overseas by wealthy citizens and businesses.

Under the amnesty, taxes will range from 2 to 10 per cent, depending on how soon individuals declare previously untaxed assets and whether the funds are repatriated to Indonesia.

Government officials expect 1,000 trillion rupiah (S$103 billion) to be repatriated from overseas and subsequently invested locally. It will also add 165 trillion rupiah to the government's tax coffers.

Proceeds from the amnesty will be used for investments that spur economic growth which will, in turn, create more jobs, said Mr Ken.

"It is fair that the rich are helping to create jobs. This is the philosophy of the tax amnesty that many still don't understand," he added.

Small businesses with an annual revenue of up to 4.8 billion rupiah will also enjoy a discounted tax rate of 0.5 per cent if their declared wealth is below 10 billion rupiah, under the scheme. It will be 2 per cent for those with wealth above 10 billion rupiah.

To encourage small businesses to sign up, the government must highlight to businesses the broader benefits of the scheme, such as better access to bank loans, export facilities and government projects, said the Centre for Indonesia Taxation Analysis executive director Yustinus Prastowo.

Activists, however, had filed for a judicial review of the new law, arguing that it protects wealthy tax evaders and money launderers from prosecution. But Mr Joko remains optimistic that the courts will back the new Bill, which was passed almost unanimously in Parliament last month.

Mr Joko had travelled to Surabaya during the weekend and will continue to Medan, Bandung, Makassar and Balikpapan to promote the tax amnesty.

A version of this article appeared in the print edition of The Straits Times on July 19, 2016, with the headline 'Indonesia pledges to guard citizens' financial data'. Print Edition | Subscribe