Domestic Companies Foreign Exchange Reporting Compliance Continues to Improve

 
Christina Desy, Fathan Qorib
 
Bank Indonesia (BI) recently held a year-end meeting to discuss the compliance of Indonesian companies with their reporting obligations. Such obligations include obligations to report foreign exchange (Lalu Lintas Devisa – LLD), foreign exchange generated from exports (Devisa Hasil Ekspor – DHE), commercial bank reporting, and debtor information systems.
 
During the meeting, the Governor of BI Bambang Brodjonegoro, said that compliance levels are generally improving each year. By October 2014, 119 banks operating in Indonesia had already submitted their LLD reports, along with another 2,420 non-bank companies.
 
Despite this general improvement, Mr. Martowardojo added that BI will continue the coordination between the government and the Audit Board (Badan Pemeriksa Keuangan) to further boost compliance levels, especially for DHE reports. So far although 2,104 DHE reports have been received this year, BI wants to further increase the number of DHE reports it receives.
 
“Not only does it play an important role for the trade balance and Rupiah exchange rate, DHE reportin also helps monitor taxes,” added Mr. Martowardojo in his statement on Tuesday.
 
In support of BI’s efforts, the Minister of Finance Bambang Brodjonegor, is urging Indonesian exporters to not only comply with their DHE reporting obligations, but to also stop manipulating the related tax calculations.
 
More specifically, Mr. Brodjonegoro addressed the transfer pricing issue. Transfer pricing is a method by which a group of companies with a company in a higher tax tariff jurisdiction transfers their income to other companies located in a country with a lower tax tariff.
 
Of concern to Mr. Brodjonegoro’s is that transfer pricing practices reduce the amount of tax payable by the exporters to the Indonesian government, which results in losses to state revenue. Although tax income is the biggest contributor to the state budget, there is still room for improvement.
 
“This situation definitely hampers Indonesian people, especially the poor whose lives much depend on the state budget,” said Mr. Brodjonegoro.
 
Furthermore, Mr. Brodjonegoro also hopes to see joint-venture exporters limit loans from their foreign affiliated companies. While admitting that the lower interest offered by foreign loans is more attractive, Mr. Brodjonegoro asserted that such action is harming state revenue, as tax from on interest income from loans will benefit the foreign country instead of Indonesia.
 
(hot/kc)