Jakarta's tax amnesty to start on Monday

Jokowi confident it will pass legal challenge by civil society groups

Indonesia's tax amnesty scheme, touted as the silver bullet to help the country raise billions of dollars in revenue, begins on Monday, said Finance Ministry Secretary General Hadiyanto.

"We will be ready for taxpayers who wish to register, declare and make (tax) redemptions," Mr Hadiyanto told reporters late on Thursday after a meeting at the Coordinating Ministry for Economic Affairs.

His comments came a day after activists filed for a judicial review of the new law, passed almost unanimously in Parliament last month, arguing that it protects wealthy tax evaders and money launderers from criminal prosecution.

President Joko Widodo, however, believes the legal challenge would not pose a major obstacle for the implementation of the amnesty plan, and remains optimistic that the courts will back the law.

"I am preparing legal experts to thoroughly explain the philosophy and significance of the tax amnesty to the constitutional court judges," Mr Joko said on Thursday, reported The Jakarta Post.

He added that aside from setting up a presidential tax amnesty task force, he will also monitor closely the implementation process for the programme.

Mr Joko is banking on the landmark tax amnesty to recover billions of dollars Indonesia had lost over decades to widespread tax evasion and in assets hidden overseas by wealthy citizens and businesses.

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

If all goes to plan, the government expects 1,000 trillion rupiah (S$102.7 billion) to be repatriated from overseas and subsequently invested locally. It will also add 165 trillion rupiah to its tax coffers.

Policy planners say this will not only increase the government's revenue by 11 percentage points, but the capital can also be used to pay for infrastructure and developmental projects that Indonesia needs to grow its economy.

Director General of Taxes Ken Dwijugiasteadi told The Straits Times yesterday that regulations governing the amnesty scheme procedures as well as the appointment of a receiving bank for the repatriation of funds have been completed.

"A third regulation covering entities that taxpayers can invest their repatriated funds in will be finalised by Sunday," he said.

The Tax Amnesty Bill is the first piece of legislation ratified by a Parliament where Mr Joko has majority support for the first time since taking office in 2014. He has called on errant taxpayers to come clean, warning them that "this opportunity will never come again as tax amnesty will not be repeated".

However, activists from civil society groups such as the People's Struggle Union of Indonesia are sceptical, liking the amnesty plan to a "get out of jail free card" for tax evaders. Together with the One Justice Foundation, the group said they have filed for a judicial review of the law.

"Money stashed by giant tax evaders is suspected to be the result of crime, so it was not reported as taxable income. Thus, (they are) subject to money laundering offence," Mr Sugeng Teguh Santosa, head of the One Justice Foundation, told Reuters on Wednesday, adding that the new law has at least 21 constitutional violations that could hurt Indonesia's anti-graft efforts.

A preliminary hearing for the judicial review will be held in 14 days.

Meanwhile, the Finance Ministry will work with Indonesia's embassies in Singapore, Hong Kong and London, all offshore tax jurisdictions where wealthy citizens are said to have banked their wealth, to promote the amnesty scheme overseas.

• Additional reporting by Wahyudi Soeriaatmadja

A version of this article appeared in the print edition of The Straits Times on July 16, 2016, with the headline 'Jakarta's tax amnesty to start on Monday'. Print Edition | Subscribe