Tax amnesty aims to help economy grow, says Indonesia

JAKARTA • Indonesia's tax amnesty scheme is aimed at collecting funds to help the economy grow, Finance Minister Sri Mulyani Indrawati yesterday told a court assessing whether the government programme is constitutional.

The amnesty scheme lets taxpayers disclose previously untaxed wealth and have their tax crime wiped clean in return for paying some penalties.

Four groups, including one Indonesian trade union, filed judicial reviews asking the Constitutional Court to declare the law creating the amnesty null, Reuters said.

Should the court strike down a law backing the programme, which was launched in July, it would be a setback for President Joko Widodo, who wants the funds repatriated to help cover Indonesia's large Budget deficit and broaden the tax base.

Defending the scheme at yesterday's hearing, Dr Sri Mulyani said the amnesty policy was not being used to pardon tax evaders.

"Rather, it is a way for taxpayers to withdraw funds or assets that have been kept abroad all this time and move them back home to grow the national economy and for taxpayers to be honest with their wealth and income."

She said the scheme can improve the tax office's database of taxpayers. Only 27.6 million Indonesians are registered taxpayers out of around 115 million citizens working in the country, she told the court.

But critics of the scheme rejected Dr Sri Mulyani's argument.

Mr Said Iqbal, president of the Confederation of Indonesian Workers Union that is part of one group of plaintiffs, told reporters: "We workers are compliant taxpayers, while those who have been corrupt, engaged in trafficking and drug trading can be pardoned under the amnesty law."

More than 1,000 trillion rupiah (S$103.8 billion) worth of assets have been declared so far under the scheme, which took off after a slow start.

Three-quarters of all foreign assets declared were held in Singapore by Indonesians, amounting to 117.3 trillion rupiah, according to information released by Indonesia's Finance Ministry last week.

As of last Thursday, "as much as 76.14 per cent of total repatriated funds and 74.51 per cent of total declared foreign assets were from Singapore", the ministry had said.

The Monetary Authority of Singapore (MAS) had earlier said in response to media queries that while Singapore banks are required to file a suspicious transaction report when handling tax amnesty cases, it does not necessarily mean that the client will be investigated by police.

The MAS had added that banks in Singapore are required to adhere to the Financial Action Task Force standard of filing a suspicious transaction report when handling tax amnesty cases, similar to the practice in other jurisdictions.

The next hearing in the case has been scheduled for next week.

A version of this article appeared in the print edition of The Straits Times on September 21, 2016, with the headline 'Tax amnesty aims to help economy grow, says Indonesia'. Print Edition | Subscribe