WhyItMatters

Jakarta wins big with tax amnesty

Indonesia, which concluded its landmark tax amnesty last week, has proven its critics wrong and won big.

In nine months, the government found its pockets had swollen by 147 trillion rupiah (S$15.4 billion) in repatriated funds, of which more than half flowed from Singapore. Never mind that the figure fell way short of its goal.

Total assets previously undeclared were a whopping 4,866 trillion rupiah, which nearly equals 40 per cent of the country's gross domestic product. Nearly 970,000 taxpayers had taken part in the reprieve, started last July to entice rich Indonesians with assets stashed abroad to come clean with the taxman. They included former president Suharto's son Tommy and tycoon Aburizal Bakrie and the Riady family.

Analysts have now hailed the tax amnesty as one of the world's most successful, saying it had achieved the government's aim to expand its taxpayer base and bring in unreported assets hidden abroad. The outstanding taxes netted could now be invested locally to drive the country's growth, finance infrastructure projects and boost a weak state budget.

The scheme was also a prelude to broader, long-term tax reforms. Cold hard cash aside, the government has now amassed a treasure trove of data. One big revelation to officials was that the now disclosed assets at home were larger than those overseas. In fact, they formed more than three-quarters of all declared funds.

The government could also work to beef up its internal infrastructure and build an efficient and transparent way to pay taxes. Knowing the demographics and nature of taxpayers should help the government pursue recalcitrant tax evaders.

With no-nonsense Finance Minister Sri Mulyani Indrawati driving the scheme, and backed by her reformer President Joko Widodo, tax cheats now know the government means business.

Arlina Arshad

A version of this article appeared in the print edition of The Straits Times on April 06, 2017, with the headline 'Jakarta wins big with tax amnesty'. Print Edition | Subscribe