Indonesia today has become the latest country to introduce a tax amnesty programme, in an effort boost its tax coffers by inviting its HNW citizens to repatriate their undeclared overseas wealth.
The country joins a number of other countries, including Argentina and, as reported, South Africa, that are bringing in tax amnesty schemes ahead of the introduction of the OECD’s Common Reporting Standard. The CRS is aimed at introducing a global system of automatic exchange of information over the next two years.
“Starting today, the tax office has started operations to service those who want to participate in the amnesty,” Indonesia finance minister Bambang Brodjonegoro told journalists in Jakarta earlier today.
Under the scheme, Indonesia will tax funds brought back into the country from abroad at just 2% to 5%, if done so before the March 2017 deadline. This money must be kept in the country – in one of 18 approved banks, though in choice of investment types – for a minimum of three years.
Experts have said that as much as US$200bn-worth of Indonesian wealth may be sitting in Singaporean institutions alone, sparking concern in the city-state that a significant percentage of this may be repatriated to Indonesia.
Argentina’s plans to introduce a tax amnesty scheme was unveiled in May by Argentine President Mauricio Macri, who took office in December, and who has himself acknowledged personal assets of US$1.25m stashed in a Bahamanian account. In a statement, Macri said, in announcing the tax amnesty, that Argentines “have billions of pesos overseas because they didn’t trust in the state”.
“We need to tell them to join us, to be part of our new era,” he added. “We invite them to wipe the fiscal slate clean.”
The Tax Justice Network has estimated that Argentines have as much as US$400bn stashed overseas.
Earlier this year, the Tax Justice Network was critical of the proposed Indonesian tax amnesty scheme, arguing that tax amnesties in general are “short-term palliatives that come at the expense of much larger long-term revenues, and severely damage democracy, creating a sense that there is one rule for the rich and powerful, and another rule for everyone else”.
It added: “More importantly, perhaps, we fear that this is a canary in the coalmine, as the world’s elites start to rebel against an approaching era of greater transparency.”