JAKARTA (Bloomberg) - Indonesia moved a step closer to hunting down tens of billions of dollars it believes its citizens have hidden abroad, after passing a law that will give tax officials access to financial data held by other countries.
The Parliament on Wednesday (July 26) approved a law in lieu of a presidential decree, fulfilling a requirement to participate under the Organisation for Economic Cooperation and Development's Automatic Exchange of Information (AEOI) framework.
The law paves the way for South-east 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 US$360 billion (S$491 billion), Finance Minister Sri Mulyani Indrawati has estimated another 185 trillion rupiah (S$18.9 billion) 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 programme.
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 Mr Suahasil Nazara, head of fiscal policy at the ministry.