Indonesian parliamentary commission approves tax amnesty bill

JAKARTA - An Indonesian parliamentary commission approved a tax amnesty bill on Monday, ensuring that the government's plan to offer low rates for taxpayers who declare untaxed wealth will go into effect soon.

Parliament votes on the bill on Tuesday.

Based on the agreed draft, the government can start offering an amnesty rate of between 2 per cent and 10 per cent for taxpayers coming forward with their untaxed wealth at home and abroad until March 2017.

The lowest rate would be given to those repatriating their offshore assets back home, in addition to declaring them. But the assets would then have to be kept in Indonesia for three years under government-appointed investment managers.

Indonesia will join India, among other countries, that have rolled out tax amnesty schemes to recover revenue and plug deficits.

Some US$200 billion (S$271.94 billion) in Indonesian money is thought to be stashed in Singapore and wealth managers there are anxious Indonesia's amnesty might lead to an outflow of assets.

Small and medium enterprises who have not been paying the right taxes can declare their assets and get much lower tariffs of 0.5 per cent to 2 per cent.

The government will pardon all amnesty participants' unpaid income tax, value-added tax and luxury tax. "The tax amnesty is aimed at accelerating growth and economic restructuring, through an increase in domestic liquidity, a stronger rupiah exchange rate and an increase in investment," said Soepriyatno, a parliamentarian who chaired the tax amnesty bill debate.

The agreed rates were higher than the government's initial proposal, which was 1 per cent to 6 per cent. But they remain below tariffs for income tax, currently at 5 per cent to 30 per cent for individuals and 20 per cent to 25 per cent for companies.

Indonesia's value-added tax is 10 per cent of sales and luxury tax can go up to 200 per cent.

The approval came after Monday's market close. The rupiah fell 1 per cent before rebounding to gain 0.3 per cent against the dollar, partly due to expectations of the bill's approval and possible intervention by the central bank.

The tax amnesty programme has been delayed several times because lawmakers failed to agree on several key issues. It was initially designed to start early this year.

Finance Minister Bambang Brodjonegoro has said the programme can bring in 165 trillion rupiah (US$12.4 billion) in additional income this year, which can help offset falling revenue from resource-related sectors.