MORE POWER FOR TAX OFFICE

Joko signs regulation allowing access to information on accounts held at banks

JAKARTA

PRESIDENT Joko Widodo has signed a new regulation giving tax authorities access to information on accounts held at financial institutions, including banks.

The regulation was signed last week as part of Indonesia’s pledge to join the Automatic Exchange of Information (AEOI) initiative led by the Organisation for Economic Cooperation and Development (OECD), a rich-country think-tank.

The government considered it “very urgent” for the tax office to get wider access to financial data, said the regulation. Failure to meet AEOI commitments could lead to significant losses and disrupt stability in Southeast Asia’s largest economy, it said.

The president can issue a government regulation in times of emergency. It becomes effective immediately, although Parliament must debate and vote on the regulation during its next sitting, which starts today, to turn it into law. If Parliament votes it down, the regulation is repealed.

The regulation calls on banks, insurance companies and other financial institutions to report client information — including cash balances and financial gains from assets — as required under international standards, and for the tax office to share the information with authorities in other countries.

The tax office can also ask financial institutions to share information for tax collection purposes.

Previously, under laws protecting banks and other financial institutions, the tax office had to file a request to the Financial Services Authority (OJK) to get access to a taxpayer’s accounts, and only for the purpose of an investigation.

The process could take more than six months and in some cases allow people to cover up possible evidence of tax avoidance, tax officers have said.

The new regulation follows an amnesty campaign encouraging taxpayers to declare hidden wealth. Almost one million taxpayers joined the programme, declaring 4,881 trillion rupiah (RM1.59 trillion) of previously concealed assets.

Joko’s flagship nine-month amnesty ended in March. It generated 135 trillion rupiah of additional tax revenue to the government, equivalent to 1.08 per cent of gross domestic product.

The largest sums amnesty participants had concealed offshore were held in Singapore, the British Virgin Islands, Hong Kong and the Cayman Islands. Reuters