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Ada Pertanyaan? Hubungi Kami Marcell Sihombing, Nando Narendra
Seminar titled "The Draft Bill on Tax Amnesty and the Benefits It Can Offer to Our Country. Photo by: RES
The government of Indonesia has committed itself to the implementation of the new global standard on the Automatic Exchange of Information (AEOI) by 2018. Through this system, tax authorities from AEOI member countries are allowed to exchange information relating to taxpayers’ financial accounts. In other words, the AEOI standard will entitle tax authorities from any country to receive immediate notification whenever one of its own citizens opens a financial account in a different sovereign country.
Consequently, this system will also allow the Directorate General of Tax at the Ministry of Finance (DJP Kemenkeu) to prevent transfer-pricing practices. Transfer pricing is a common practice whereby business entities manipulate and evade their tax obligations. They achieve this by creating the illusion that their profit margins are much smaller than they really are through the international transfer of said profits. As a consequence, businesses and corporations which employ this technique are able to pay far less in tax than they should by law.
“During the upcoming era of information transparency, which is due to commence in 2018, the country’s tax authorities will have access to financial data from all across the globe,” asserted Indonesia’s Minister of Finance, Bambang Brodjonegoro, during a seminar titled The Draft Bill on Tax Amnesty and the Benefits It Can Offer to Our Country,which was held in Jakarta on Tuesday, 5 April 2016.
Minister Bambang emphasized that the Draft Bill on the Tax Amnesty (Draft Bill), which is still under deliberation, should be passed into law as soon as possible, and that the Draft Bill would enable both the government and the House of Representatives (House) to exploit the AEOI standard to its fullest. Moreover, the Draft Bill is also seen as important as a number of countries, including Indonesia, have already announced their intention to implement the AEOI standard by September 2017, which is earlier than the scheduled timeframe.
However, Minister Brodjonegoro, in addition to the passage of the Draft Bill, also discussed another two important issues during the seminar which closely relate to the DJP Kemenkeu’s efforts to increase Indonesia’s tax income through the implementation of the AEOI standard.
Minister Brodjonegoro believes that the confidentiality principle, which currently has to be adhered to by the banking sector and which is mandated by Law No. 10 of 1998on the Amendment to Law No. 7 of 1992on Banking (Banking Law), is an obstacle as regards the implementation of the tax amnesty and the AEOI standard. This is due to the fact that the basic principle of transparency encompassed by the AEOI standard includes banking-related information, which would greatly assist in the prevention of transfer-pricing activity. Minister Bambang is therefore hoping that the current Banking Law will be revised upon passage of the Draft Bill into law.
“There are certain obstacles within the banking sector relating to the confidentiality principle which will have to be overcome,” asserted Minister Brodjonegoro.
Minister Brodjonegoro also pointed to the need to revise several of the provisions stipulated under Law No. 28 of 2007 on General Provisions and Procedures for Taxation (Taxation Law), specifically those relating to income-tax tariffs.
“It is important to revise the Taxation Law so that more competitive tariffs can be formulated, especially as they apply to both companies and individual taxpayers,” asserted Minister Brodjonegoro.
Airlangga Hartanto, Chair of Commission XI at the House, who was also present at the recent tax seminar, asserted that his institution remained optimistic that the Draft Bill would be passed into law in near future. According to Hartanto, it will only take another two House sessions before the Draft Bill ultimately becomes law during the first half of the second semester of 2016. Mr. Hartanto further revealed that input into the Draft Bill was currently being sought from relevant stakeholders in order to ensure that a piece of legislation emerges which can be implemented effectively.
“We [the House] are currently accepting input from the public, thus we need to arrange several public-hearing sessions,” asserted Mr. Hartanto.
As regards both the Banking Law and the Taxation Law, Mr. Hartanto admitted that the House was already planning to streamline the deliberation process relating to these two laws. Indeed, the planned amendments to these two laws are due for completion before 2018. Mr. Hartanto also outlined several other areas which are due for revision, such as tariffs, value-added tax, and tax-reduction incentives which differentiate between taxpayers who routinely pay their taxes and taxpayers who do not.
“After the Draft Bill passes into law, the Taxation Law will be revised first, and then the Banking Law should follow right behind. Speeding up the revision process before 2018 is essential, and efficient time management will be necessary so that the revision of both of these important laws does not fail,” concluded Mr. Hartanto.
Liquidity Improvement
Minister Brodjonegoro also stated his belief that the tax amnesty represents just one among many possible ways of optimizing the Indonesian economy. Minister Brodjonegoro also believes that in spite of the current slowdown in economic growth, the Draft Bill will eventually allow the Indonesian economy to fulfill its maximum potential.
Minister Brodjonegoro bases this belief on the fact that Indonesia’s financial liquidity will be greatly improved if the assumed sizeable amounts amount of taxpayer assets currently parked in other countries can ultimately be repatriated back to Indonesia. The Minister is confident that such assets, which of course have not yet been subject to taxation, will greatly increase the state budget, as well as the country’s financial liquidity as a whole.
While the Minister also acknowledged the commonly aired criticism that the government is ultimately taking a shortcut with this move in order to increase the income it receives from taxation, he also affirmed that more comprehensive policies would eventually be issued.
“The tax amnesty is primarily focused on unreported taxable assets instead of taxable income. Assets represent the accumulation of income which, according to our rough calculations, easily surpasses our country’s total Gross Domestic Product (GDP), or around IDR 11,400 trillion,” asserted Minister Brodjonegoro.
Commenting on this issue, Harry Azhar Aziz, the Chair of the Audit Board of the Republic of Indonesia (Badan Pemeriksa Keuangan – BPK RI), asserted that during its early stages, the implementation of the tax amnesty would inevitably be beset by doubts and skepticism, both from the general public and from the various parties who have hidden their assets overseas.
“No doubt there will be doubts during the initial implementation stage of the Draft Bill. Although personally speaking, I support the passage of the Draft Bill, because it can serve as a reserve fund in the event of the country experiencing a serious financial deficit,” asserted Mr. Aziz.
(rfs/sp)
Marcell Sihombing, Nando Narendra
Seminar titled "The Draft Bill on Tax Amnesty and the Benefits It Can Offer to Our Country. Photo by: RES
The government of Indonesia has committed itself to the implementation of the new global standard on the Automatic Exchange of Information (AEOI) by 2018. Through this system, tax authorities from AEOI member countries are allowed to exchange information relating to taxpayers’ financial accounts. In other words, the AEOI standard will entitle tax authorities from any country to receive immediate notification whenever one of its own citizens opens a financial account in a different sovereign country.
Consequently, this system will also allow the Directorate General of Tax at the Ministry of Finance (DJP Kemenkeu) to prevent transfer-pricing practices. Transfer pricing is a common practice whereby business entities manipulate and evade their tax obligations. They achieve this by creating the illusion that their profit margins are much smaller than they really are through the international transfer of said profits. As a consequence, businesses and corporations which employ this technique are able to pay far less in tax than they should by law.
“During the upcoming era of information transparency, which is due to commence in 2018, the country’s tax authorities will have access to financial data from all across the globe,” asserted Indonesia’s Minister of Finance, Bambang Brodjonegoro, during a seminar titled The Draft Bill on Tax Amnesty and the Benefits It Can Offer to Our Country,which was held in Jakarta on Tuesday, 5 April 2016.
Minister Bambang emphasized that the Draft Bill on the Tax Amnesty (Draft Bill), which is still under deliberation, should be passed into law as soon as possible, and that the Draft Bill would enable both the government and the House of Representatives (House) to exploit the AEOI standard to its fullest. Moreover, the Draft Bill is also seen as important as a number of countries, including Indonesia, have already announced their intention to implement the AEOI standard by September 2017, which is earlier than the scheduled timeframe.
However, Minister Brodjonegoro, in addition to the passage of the Draft Bill, also discussed another two important issues during the seminar which closely relate to the DJP Kemenkeu’s efforts to increase Indonesia’s tax income through the implementation of the AEOI standard.
Minister Brodjonegoro believes that the confidentiality principle, which currently has to be adhered to by the banking sector and which is mandated by Law No. 10 of 1998on the Amendment to Law No. 7 of 1992on Banking (Banking Law), is an obstacle as regards the implementation of the tax amnesty and the AEOI standard. This is due to the fact that the basic principle of transparency encompassed by the AEOI standard includes banking-related information, which would greatly assist in the prevention of transfer-pricing activity. Minister Bambang is therefore hoping that the current Banking Law will be revised upon passage of the Draft Bill into law.
“There are certain obstacles within the banking sector relating to the confidentiality principle which will have to be overcome,” asserted Minister Brodjonegoro.
Minister Brodjonegoro also pointed to the need to revise several of the provisions stipulated under Law No. 28 of 2007 on General Provisions and Procedures for Taxation (Taxation Law), specifically those relating to income-tax tariffs.
“It is important to revise the Taxation Law so that more competitive tariffs can be formulated, especially as they apply to both companies and individual taxpayers,” asserted Minister Brodjonegoro.
Airlangga Hartanto, Chair of Commission XI at the House, who was also present at the recent tax seminar, asserted that his institution remained optimistic that the Draft Bill would be passed into law in near future. According to Hartanto, it will only take another two House sessions before the Draft Bill ultimately becomes law during the first half of the second semester of 2016. Mr. Hartanto further revealed that input into the Draft Bill was currently being sought from relevant stakeholders in order to ensure that a piece of legislation emerges which can be implemented effectively.
“We [the House] are currently accepting input from the public, thus we need to arrange several public-hearing sessions,” asserted Mr. Hartanto.
As regards both the Banking Law and the Taxation Law, Mr. Hartanto admitted that the House was already planning to streamline the deliberation process relating to these two laws. Indeed, the planned amendments to these two laws are due for completion before 2018. Mr. Hartanto also outlined several other areas which are due for revision, such as tariffs, value-added tax, and tax-reduction incentives which differentiate between taxpayers who routinely pay their taxes and taxpayers who do not.
“After the Draft Bill passes into law, the Taxation Law will be revised first, and then the Banking Law should follow right behind. Speeding up the revision process before 2018 is essential, and efficient time management will be necessary so that the revision of both of these important laws does not fail,” concluded Mr. Hartanto.
Liquidity Improvement
Minister Brodjonegoro also stated his belief that the tax amnesty represents just one among many possible ways of optimizing the Indonesian economy. Minister Brodjonegoro also believes that in spite of the current slowdown in economic growth, the Draft Bill will eventually allow the Indonesian economy to fulfill its maximum potential.
Minister Brodjonegoro bases this belief on the fact that Indonesia’s financial liquidity will be greatly improved if the assumed sizeable amounts amount of taxpayer assets currently parked in other countries can ultimately be repatriated back to Indonesia. The Minister is confident that such assets, which of course have not yet been subject to taxation, will greatly increase the state budget, as well as the country’s financial liquidity as a whole.
While the Minister also acknowledged the commonly aired criticism that the government is ultimately taking a shortcut with this move in order to increase the income it receives from taxation, he also affirmed that more comprehensive policies would eventually be issued.
“The tax amnesty is primarily focused on unreported taxable assets instead of taxable income. Assets represent the accumulation of income which, according to our rough calculations, easily surpasses our country’s total Gross Domestic Product (GDP), or around IDR 11,400 trillion,” asserted Minister Brodjonegoro.
Commenting on this issue, Harry Azhar Aziz, the Chair of the Audit Board of the Republic of Indonesia (Badan Pemeriksa Keuangan – BPK RI), asserted that during its early stages, the implementation of the tax amnesty would inevitably be beset by doubts and skepticism, both from the general public and from the various parties who have hidden their assets overseas.
“No doubt there will be doubts during the initial implementation stage of the Draft Bill. Although personally speaking, I support the passage of the Draft Bill, because it can serve as a reserve fund in the event of the country experiencing a serious financial deficit,” asserted Mr. Aziz.
(rfs/sp)