Controversial tax amnesty proves di­vi­sive

The Myanmar Times - - Business -

IN­DONE­SIA has hailed a tax amnesty as a ma­jor suc­cess af­ter it raised more than US$7 bil­lion in its first few months, but crit­i­cism is mount­ing that the controversial scheme lets the su­per-rich off the hook.

Au­thor­i­ties be­gan the flag­ship pol­icy with much fan­fare in July, ask­ing In­done­sians to de­clare their hid­den wealth in ex­change for pay­ing penal­ties far be­low reg­u­lar tax rates.

Pres­i­dent Joko Wi­dodo is des­per­ate for ex­tra money to boost Southeast Asia’s top econ­omy af­ter al­most two years in power, dur­ing which his ef­forts to turn around slow­ing growth have met with lit­tle suc­cess.

The govern­ment hopes the ini­tia­tive will lure back tens of bil­lions of dol­lars stashed abroad, par­tic­u­larly in neigh­bour­ing city-state Sin­ga­pore, and get more peo­ple to pay tax in a coun­try where only about 10 per­cent are reg­is­tered tax­pay­ers.

The first phase of the amnesty – when peo­ple pay penal­ties as low as 2pc on de­clared as­sets – closed last week with bet­ter-than-ex­pected re­sults af­ter a late surge in in­ter­est.

More than 350,000 peo­ple de­clared as­sets to­talling 3620 trillion ru­piah ($278 bil­lion), which brought the govern­ment 97.2 trillion ru­piah ($7.46 bil­lion) in rev­enue, ac­cord­ing to fi­nance min­istry data.

Mr Wi­dodo, known pop­u­larly as Jokowi, hailed the “trust from the peo­ple and the busi­ness com­mu­nity to­wards the govern­ment”, while an­a­lysts wel­comed the pos­i­tive start to the amnesty, which runs un­til March next year.

But the ini­tia­tive has been watched with in­creas­ing anger by ac­tivists and some sec­tions of the pub­lic in re­cent weeks as a long list of the coun­try’s wealth­i­est ty­coons have rushed to de­clare as­sets with no obli­ga­tion to say where they came from.

Tommy Suharto, the mul­ti­mil­lion­aire son of for­mer dic­ta­tor Suharto, and James Ri­ady, boss of ma­jor con­glom­er­ate Lippo Group, are among those who signed up.

The govern­ment has en­cour­aged the par­tic­i­pa­tion of busi­ness chiefs in a bid to spur in­ter­est in the ini­tia­tive af­ter a slug­gish start, with the su­per­rich rushed down VIP lanes in a blaze of pub­lic­ity as they ar­rive at tax of­fices to sign up.

But such treat­ment amounts to hold­ing the wealthy up as he­roes when all they are do­ing is pay­ing their taxes, said Fir­daus Ilyas, an ac­tivist from NGO In­done­sia Corruption Watch.

“The im­age be­ing built up is that peo­ple who take part in the tax amnesty are he­roes help­ing de­velop the na­tion,” he told AFP.

“But we know if they take part, it just means they didn’t pay tax.”

Among the small num­ber of In­done­sians who have reg­u­larly paid their taxes, there is dis­ap­point­ment at the treat­ment be­ing given to the su­per­rich sim­ply for pay­ing up at a rate be­low nor­mal.

Reg­u­lar tax rates for in­di­vid­u­als range from 5pc to 30pc depend­ing on in­come while the cor­po­rate tax rate is 25pc. In the first phase of the amnesty, par­tic­i­pants pay penal­ties of be­tween 2pc and 4pc on de­clared as­sets.

Ac­tivists have chal­lenged the amnesty in the Con­sti­tu­tional Court while the anger spilled out onto the streets last week when thou­sands protested against the scheme in Jakarta, with de­mon­stra­tors say­ing the money could have come from cor­rupt ac­tiv­i­ties.

Ken Dwi­ju­giasteadi, the govern­ment’s top tax of­fi­cial, re­fused to be drawn on whether he was con­cerned about where the money came from, say­ing the tax of­fice’s job was just to col­lect the funds.

De­spite the con­cerns, many an­a­lysts be­lieve the pos­i­tives out­weigh the neg­a­tives.

In­done­sia needs the money to plug a bud­get deficit, and also des­per­ately wants to get more peo­ple into its tax sys­tem – only about 30 mil­lion peo­ple are reg­is­tered tax­pay­ers out of a pop­u­la­tion of 255 mil­lion. –

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