Jakarta’s tax amnesty gets a rich boost
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Two of Indonesia’s wealthiest men say they will participate in a government-led tax amnesty to clear their past omissions, boosting the scheme’s credibility.
Mr James Riady, the son of Lippo Group’s founder, went to the Jakarta tax office yesterday to take part, said his spokesman Danang Kemayan Jati. Mr Tahir, founder of Bank Mayapada, who goes by one name, said by phone that his family would submit documents this month to support the plan.
“If a big fish like Riady joins the programme in a public way, that lessens the restraint for everybody else to follow suit,” said OCBC Bank economist Wellian Wiranto in Singapore, according to Bloomberg.
“We have seen the momentum start to build, so things are starting to look up for the tax amnesty.”
President Joko Widodo has staked his credibility on a programme that the government estimates will generate 165 trillion rupiah (S$17 billion) in revenue.
He ordered his Cabinet to summon the largest taxpayers, especially those with assets overseas, to ensure they take part. Since the amnesty began in July, the finance ministry has seen 4 trillion rupiah in penalty fees, or 2.4 per cent of the target.
Tax rates under the amnesty will range from 2 per cent to 10 per cent over three stages, depending on how soon individuals declare their previously untaxed assets and whether the funds are repatriated.
“We have seen the momentum start to build, so things are starting to look up for the tax amnesty.”
Indonesia has a population of 250 million, but only 27 million are registered taxpayers. Of these, just a million file tax returns regularly each year – one of the lowest figures among countries in the region.
Newly minted Finance Minister Sri Mulyani Indrawati has said she is putting trust-building at the top of her agenda as she tries to get more Indonesians to pay taxes, to raise funds for a massive infrastructure plan aimed at stimulating growth in South-east Asia’s largest economy.
“It’s not acceptable for a country like Indonesia to have a tax ratio that is very low,” she told Bloomberg in an interview last month. “This is… because both sides, the taxpayers as well as the government, have not been able to establish a good relationship based on trust, confidence and credibility.”
She also pledged to address Indonesia’s complicated procedures and high tax rates compared with neighbouring countries.
Individuals who sign up for the plan will be allowed to invest in assets such as gold, property and infrastructure projects, according to the finance ministry. Participants can also move funds between approved assets before a three-year holding period ends, the ministry said.
The scheme has got off to a slow start, but could pick up pace with big businesses getting on board.
Lippo Group, founded by Mr Mochtiar Riady in the 1950s, has stakes in property developer Lippo Karawaci, healthcare firm Siloam International Hospitals and retailer Matahari Department Store. It also has stakes in Singapore-based First Real Estate Investment Trust and Lippo Malls Indonesia Retail Trust.
Questions & Answers
Q.What is the government's financial target for the tax amnesty programme?
What is the government's financial target for the tax amnesty programme?
The Indonesian government aims to generate 165 trillion rupiah in revenue through the tax amnesty scheme. This figure is equivalent to S$17 billion, according to their estimates for the programme.
Q.How much revenue has the finance ministry collected from the amnesty so far?
How much revenue has the finance ministry collected from the amnesty so far?
Since the amnesty began in July, the finance ministry has collected 4 trillion rupiah in penalty fees. This amount represents 2.4 per cent of the overall target set for the programme.
Q.Why does the new Finance Minister want to increase tax collection?
Why does the new Finance Minister want to increase tax collection?
Finance Minister Sri Mulyani Indrawati aims to raise funds for a massive infrastructure plan. This plan is intended to stimulate economic growth in South-east Asia's largest economy, which currently has a very low tax ratio.
Q.What investment options are available for those participating in the amnesty?
What investment options are available for those participating in the amnesty?
Individuals who sign up for the plan are permitted to invest in various assets, including gold, property, and infrastructure projects. They can also move funds between approved assets before a three-year holding period concludes.
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