The Indonesian government began implementing a tax amnesty program to increase revenue and investment. Under the terms, repatriated assets will enjoy a reduced tax rate between 2 and 10 percent depending on how quickly participants sign up for the program and if they just repatriate funds or assets. Repatriated funds must stay within Indonesia for at least three years and must be invested via banks, investment managers and securities companies. Eight permissible investment instruments have been introduced, with a minimum three-year maturity, including government and state-owned enterprise bonds and real estate investment trusts.
Locals have declared assets worth almost US$ 200 billion in the program's nine-month scheme. Around US$ 5.7 billion in proceeds are expected to ease pressure on the public purse. The declaration of assets is significant. By comparison, Italy was able to convince citizens to declare around US$ 67 billion while Argentina recouped around US$ 80 billion. A low penalty rate is one reason why the tax amnesty program has performed well. Another is that, this is the first amnesty in a long time with the last being almost a decade ago. One reason such a scheme has performed badly in other places like India is because it occurs too frequently. Analysts also hope that following this Indonesia will reduce its corporate income tax from 25 percent to something around 17 percent which is offered by Singapore. Such factors along with information exchange is making it harder for people to hide from the law, which has helped Indonesia make the tax amnesty program successful.
This article was first published on www.aseanbriefing.com.
Since its establishment in 1992, Dezan Shira & Associates has been guiding foreign clients through Asia's complex regulatory environment and assisting them with all aspects of legal, accounting, tax, internal control, HR, payroll and audit matters. As a full-service consultancy with operational offices across China, Hong Kong, India and emerging ASEAN, we are your reliable partner for business expansion in this region and beyond.Back to Articles
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