Indonesian Tax News

Indonesia’s parliament approves tax amnesty bill

JAKARTA: Indonesia is launching a tax amnesty programme that the government, facing a sizeable budget shortfall, is counting on to bring home billions of dollars citizens have parked overseas.

The nine-month programme, approved on Tuesday (Jun 28) by parliament, offers citizens low rates for paying some penalty on assets at home or abroad that have not been previously declared.

There’s a scale of payments that gives the lowest penalty rates for people who pay the quickest, and to those who don’t just declare foreign assets but bring the money home.

The government is offering 2-5 per cent rates for assets repatriated by March 2017. Those assets must be kept in Indonesia for three years in banks appointed as managers, and can be invested in several ways including government and corporate bonds.

For individuals joining the amnesty, the government will pardon their unpaid income tax, value added tax and luxury tax.

With slowing growth, “all countries are in a race to attract more capital,” said Finance Minister Bambang Brodjonegoro, who added that the amnesty law “will reduce economic activity undeclared to the tax authority, thus it will ignite a sense of justice”.

Jakarta markets welcomed amnesty approval. The rupiah , up 0.6 per cent at midday, rose to be 1.2 per cent up to 13,170, its highest since May 3. Shares rose on hopes some of the money coming home will be invested in them.

Some US$200 billion in Indonesian money is thought to be stashed in Singapore and wealth managers have been anxious an Indonesian amnesty might lead to an outflow of assets.

But a senior private banker at a European bank in Singapore said he did not think the amnesty would have a major impact on private banking business.


The rates offered in the amnesty “are not excessive so I feel that smaller clients will take it. Larger clients will only opt for repatriation if they feel that investment opportunity will outweigh the cost differential,” he said, adding that Singapore and international banks with an Indonesia presence “will benefit as they can capture this flow”.

Not everyone in Indonesia is happy about the amnesty.

Indonesia Corruption Watch, a non-governmental organisation, called the programme unjust to taxpayers who paid their dues correctly and honestly.

“This is anti-productive to efforts to stop money laundering, eradicate corruption, stop illegal logging and all other crimes,” Firdaus Ilyas said, adding that the government has promised not to investigate the source of declared assets.

The government has been lobbying for an amnesty programme because slow economic growth has meant tax revenue this year is well below the target and lower than in 2015.

Just after the amnesty was approved, parliament passed a 2016 revised budget that sees the fiscal deficit at 2.35 per cent of gross domestic product, instead of the originally planned 2.15 per cent.

The government maintains the amnesty can bring in 165 trillion rupiah (US$12.46 billion) in revenue, a figure many analysts feel is extremely optimistic.

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