INDONESIANS have declared 117.3 trillion rupiah ($8.9 billion) of assets held in Singapore under the government’s tax amnesty, though only a small proportion of that figure has been brought back home, Indonesia’s Finance Ministry said on Friday.
Of the total Singapore assets declared to the Indonesian government as of September 15, only 14.1 trillion rupiah, or about 12 percent, has been repatriated, the ministry said.
Under the amnesty launched in June, Indonesians can pay a tax rate starting at 4 percent on declared assets that they choose to leave overseas. The rate increases in stages to 10 percent as the amnesty draws to a close in March. Indonesians who agree to repatriate their assets, for a period of at least three years, are offered a rate of only 2 percent, as well as a range of possible investments.
Indonesia is banking on securing 165 trillion rupiah of tax revenue from the amnesty, which would help offset traditionally poor tax- collection rates while keeping the budget deficit under a mandated 3-percent threshold. Last month the central bank said it was getting ready to stop the rupiah from strengthening too much on the back of funds coming home as part of the amnesty.
In an indicator that the collection program might be faltering, Indonesia’s Finance Ministry earlier this week removed a progress bar it was using to compare amounts received against the 165-trillion-rupiah target from the web site it set up to provide information on the tax amnesty. The government has received 22.7 trillion rupiah so far, the ministry said on Friday.
Ambitious target
“Indonesia’s ambitious tax revenue and fiscal-deficit targets look to be under threat, given the anemic tax-amnesty inflows so far,” analysts at Australia & New Zealand Banking Group Ltd. said in a report on Friday.
Jakarta also faces political backlash from the amnesty, which has been criticized by the Organisation for Economic Co-operation and Development as offering rates that are unfair to law-abiding taxpayers.
On the other hand, Indonesia’s Constitutional Court could clear up some doubts about the future of the program when it rules on petitions brought by civil-society groups that are seeking to nullify the amnesty.
Positive ruling
A positive ruling “should remove the uncertainty that may be hampering more participation,” said Euben Paracuelles, a Singapore-based economist with Nomura Holdings Inc., in a report on Friday. “We also see it likely that as the number of participants increases, this could snowball and encourage even more participation.”
Earlier this month, two of Indonesia’s wealthiest men said they will participate in the tax amnesty to clear their past omissions, boosting the credibility of the program.