Thousands of Indonesian workers protest against tax amnesty

An Indonesian laborer drinks water as they march toward the presidential palace during a rally in Jakarta, Indonesia on Sept 29, 2016.
An Indonesian laborer drinks water as they march toward the presidential palace during a rally in Jakarta, Indonesia on Sept 29, 2016. PHOTO: EPA

JAKARTA (REUTERS) - Thousands of Indonesian union workers marched to the heart of Jakarta on Thursday (Sept 29) to protest against a government tax amnesty scheme, which is meant to plug a large budget deficit but which they say unfairly pardons wealthy tax dodgers.

The amnesty programme, under which Indonesians are encouraged to repatriate previously undeclared overseas assets to avoid increasing penalties, was launched in July and is a top priority for President Joko Widodo.

Almost US$200 billion (S$272 billion) of assets have been declared so far under the programme, which is also meant to broaden Indonesia's tax base, according to finance ministry data.

However, a rising number of blue-collar workers, who make up the bulk of Indonesia's workforce, consider it unconstitutional because they say it forgives the past crimes of rich taxpayers.

Some of Indonesia's wealthiest individuals, including tycoon-politician Aburizal Bakrie, Lippo Group chief executive James Riady, and Hutomo Mandala Putra - a son of the late authoritarian president Suharto - are among more than 100,000 who have signed up.

"We workers have diligently paid our taxes but these rich people and big corporations are being pardoned after not paying their taxes," Said Iqbal, president of the Confederation of Indonesian Workers Union, told reporters before a peaceful march to the presidential palace.

"These funds coming in could be from trafficking, drugs or corruption, and will all become legalised when declared through the tax amnesty," he added.

Iqbal said there could be further protests, including work stoppages, if the government continued with the amnesty.

His union, along with three other groups, have filed legal action against the amnesty law in Indonesia's Constitutional Court. That has created some uncertainty over its future, with a court ruling not expected for weeks.

Government officials have vigorously defended the programme. "We want people to understand that the tax amnesty is for Indonesia, to build Indonesia," Finance Minister Sri Mulyani Indrawati told reporters on Thursday. "We will make efforts to ensure people that putting their money in Indonesia is a good and rational option." The government is banking on the amnesty to bring in 165 trillion rupiah (S$17.2 billion) in 2016 to help keep the budget deficit from breaching a legal limit of 3 per cent of gross domestic product.

Friday marks the end of the amnesty's first phase, during which the lowest penalties for registering previously unreported assets applied. The penalty rates will rise after September under the programme, which lasts until March 2017.