Hot Subject 2016 Sept - Tax Amnesty

[Bad_azz]

Fair point Happyman but a bit chicken and egg perhaps?
If the taxes don't get paid then where does the money for the services come from? Yet, if the taxes do get paid, what is the plan for the use of the dosh?

 

[kimdub]

Assuming that the money that arrives in the Indonesian banks is in a foreign currency, say US$, then because there is so much of it floating around in the banks, it becomes less valuable. Net effect is it takes less rupiah to buy the dollars (or vice versa), and the rupiah could become overvalued. The banks apparently have a few things in place to stop this happening........... famous last words

http://www.indonesia-investments.co...-indonesia-investment-instruments-ii/item6988

Very good simple explanation. If it works however, the follow up to stop this in the future is very important. If stricter enforcement and punishment of corruption is not taken seriously then this will just become a common occurrence ever decade or so.

 

[HappyMan]

Very good simple explanation. If it works however, the follow up to stop this in the future is very important. If stricter enforcement and punishment of corruption is not taken seriously then this will just become a common occurrence ever decade or so.

I had thought the same. Might it be prudent for some of the tax income to be earmarked for future tax enforcement?

 

[HappyMan]

Fair point Happyman but a bit chicken and egg perhaps?
If the taxes don't get paid then where does the money for the services come from? Yet, if the taxes do get paid, what is the plan for the use of the dosh?

Yes, it might be a bit of a chicken/egg scenario. Still, I think we could agree that the amount of corruption frequently revealed by the media diminishes any claim to moral imperative for tax payment.

 

[Nimbus]

In Indonesia the concept of tax or paperwork forgiveness is not uncommon, we even have a term for it: pemutihan. It literally means 'whitening', but can be loosely translated as 'whitewashing'. The government understands that many, many people simply can't afford to follow all of the bureaucratic requirements, so they often designate a certain period to get your papers straight without penalty. This one is slightly different because the target demographic is not the poor. Maybe that's the reason they use a different term: pengampunan (amnesty).

 

[Rainman]

I d think that a discussion of the ethics of tax evasion and tax amnesties would be a bit amiss if it failed to mention corruption and the value of services received in exchange for taxes paid. Hypothetically speaking, do you think a state that provides relatively few services in exchange for taxes paid has the same "moral right" to taxes as one where the government makes good use of tax income? Would it make sense for taxes to be the same in Germany and Indonesia? Would one be more "wrong" for evading tax in Germany than for doing the same in Indonesia?

HappyMan. Maybe u and me do not benefits from the tax collected. But the poor get free education and free medical.

 

[fastpitch17]

HappyMan. Maybe u and me do not benefits from the tax collected. But the poor get free education and free medical.

Then why do the poor take kids out of schools because they can't afford it? Why do medical facilities still turn away poorer patients even if enrolled in BPJS? There are a lot more cost out there then some want to admit.

 

[Smallworld]

....

So what is next and how u see the Rup to the Dollar in Sept/Oct? Lots of my rich friends expect it to reach Rup 10k to a dollar. What do u think?

http://www.thejakartapost.com/news/2016/07/18/govt-calm-over-spore-move-to-counter-tax-amnesty.html

I think it can be true. IDR will get stronger. BI has to closely monitor the whole situation if Indonesia want to export.

 

[Bad_azz]

Then why do the poor take kids out of schools because they can't afford it? Why do medical facilities still turn away poorer patients even if enrolled in BPJS? There are a lot more cost out there then some want to admit.

... and why do the poor have to pay tips to teachers to get decent grades etc ... endless lists.

 

[fastpitch17]

... and why do the poor have to pay tips to teachers to get decent grades etc ... endless lists.

I know, there are so many under the table expectations with in the schools from teachers up to the administration. On top of that, they get a crap memorize this education and a no fail year 1 to 6 pass.

 

[HappyMan]

HappyMan. Maybe u and me do not benefits from the tax collected. But the poor get free education and free medical.

It's true. I agree that we all benefit from the good things done by the government with tax money. I think people should pay their taxes, practically speaking. At the same time, it is hard not to laugh when I think of members/staff of the Indonesian government (and DPR in particular) talking about people supporting Indonesia or doing what is right for the country instead of pursuing personal gain. It feels a bit like the pot calling the tin can black.

I'd like a little transparency to go with my tax bill, they can even put it on my tab.

 

[Jamu]

Assuming that the government is modestly successful with the amnesty, expect the Rupiah to strengthen, the stock market to continue to rise and property prices to remain strong, at least in the short/medium term. I agree with dafluff that this is a great opportunity for the elite to clean their overseas wealth for a relatively low cost. Common reporting standards are a new fact of life according to my banker, and there will be a full information exchange between Singapore and Indonesia by 2018, so the Indo government will learn which of its citizens and residents still have undeclared money in Singapore and can take action accordingly.

 

[Smallworld]

...and there will be a full information exchange between Singapore and Indonesia by 2018, so the Indo government will learn which of its citizens and residents still have undeclared money in Singapore and can take action accordingly.

Well said Jamu.

Last time I heard that Singapore is worried that there can be a major exodus of money leaving the country. It may have some impact on Singaporean economy.

.....Singaporean banks of imposing hurdles by allegedly luring Indonesian customers with a special scheme to leave their assets in the city state instead of repatriating them

“Every country wants to survive,” Vice-President Jusuf Kalla told reporters on Thursday (July 21). “It (only) proves what people always say that most of the money stashed in Singapore comes from Indonesia.

http://www.todayonline.com/world/asia/indonesia-plans-recover-millions-stashed-spore

 

[Jamu]

The Singapore bankers I have talked to don't seem worried as most banks are very well capitalized. The main impact would be on the wealth management industry, which would obviously see a reduction in assets under management. Hypothetically this could impact bank profits, but most of the big wealth managers are part of global groups so it will definitely not be catastrophic. Btw there is also a tremendous amount of Chinese, Indian, Thai, Vietnamese and European money in Singapore, which for the time being is not going anywhere so the country is hardly reliant on Indonesian owned deposits. In any case, I would be reluctant to pay much attention to anything that comes out of the mouth of Mr. Kalla. Most of his public pronouncements seemed designed to provoke nationalistic sentiments at home but viewed from abroad they make him look less than intelligent.

 

[Missnaughty]

Tax Amnesty in reality

It sounds good and seems like govt is being generous by forgiving tax liability and waive the penalty. The cost to bring the fund in is "only" 2% that could be raise to 200% next year if they are still failed to report. The target is the money/properti/wealth own by citizen or resident that is not reported on their tax return (SPPT) regardless where it is. One thing that I notice, the tax department did not ask where the money/fund come from, there are no supporting document to prove that these wealth were legally acquired need to be provided. As long as you pay the 2% ... all is forgiven. So isn't this program good for those who "hiding" their money away to bring it back without question? And these wealth is guaranteed won't be questioned in the future.

Also, they treated every case in the same manner. Even to the Indonesian citizen who repatriated back and bring their own saving from the money they earned that has already been taxed. I argued this matter to a friend, that they need to make the regulation more comprehensive this saving should not be taxable therefore shouldn't be penalised, even in the small rate of 2%. This friend told me that the tax owed on their income can be offset by foreign tax credit based on the tax treaty between 2 countries, but yet as the saving is an accumulated wealth that has not been reported before, therefore it fall into category unreported income/wealth and will be penalised. Again, when you work/live abroad for more than 183 days a year, per Per2/PJ/2009, you are not required to pay and file Indonesian tax and when you come back, you have to pay 2% from their after tax money or if failed pay 200%?

The 2% is not tax but a penalty of not declaring your wealth in the time manner.

 

[fastpitch17]

The rupiah may strengthen beyond 10,000 per US dollar, far from the current level of around 13,000, assuming that the tax amnesty program succeeds in repatriating the targeted Rp 1 quadrillion (US$76.5 billion) of Indonesians’ offshore assets, an analyst says.

http://www.thejakartapost.com/news/...may-take-rupiah-to-below-10000us-analyst.html

If it is successful to the full extent Indonesia expects it to be. That's a big if. Plus, the banks handling the returned cash will hopefully be smart and not start buying rupiah en force thus lowering the value of the currency they are receiving. Who will take the loss? most likely the owner of the cash and they may not want to be part of that. At the same time the government will be saying they want the tax and it has to be converted first putting pressure on the banks.

 

[dafluff]

I very much doubt that the Rp could go to 10,000, or that the government would allow it (at least not in the short term), as it would cause significant upheaval in the economy. Also, any strengthening of the Rp would be a good time for BI to cut interest rates, for instance. As far as central banks go, it is very much easier to keep a currency weak. I think 12,000 is probably a far more realistic outcome, assuming nothing else happens other than a successful amnesty program.

 

[waarmstrong]

The program is a bitter pill, but for the good of the country, the government has opted to hold its nose and swallow. Ironic is it not the a high proportion of the rats coming back to refloat the ship of state were and are the government. Without a concerted effort to make real progress at cleaning house, I fear that the amnesty will become an annual event. The return of the old finance minister as the new finance minister is an encouraging sign.

 

[Banana72]

Indonesian Tax Amnesty...should we pay attention to this?

Reading from the Linkedin thread

https://www.linkedin.com/pulse/do-expats-living-indonesia-need-care-upcoming-tax-amnesty-hertanto

Do we need to care about this? Obviously I have no properties under my name here. Even my car is the company's car. The company pays my salary's tax. I have no assets except CDs under my name. All already reported every year as FBAR in the US.

 

[Jamu]

Yes, this is a concern for all Indonesian residents (i.e., anyone staying in Indonesia for 183 days or more in a 12 months period). Indonesian residents with income from property / investments outside the country have always been liable to declare the income and pay tax on it in Indonesia. The new information exchange protocols will facilitate enforcement of this law - in the past the Indo government would have no way to obtain information on a resident's foreign assets and income unless it was self-declared. From 2018 they will have access to this information from other countries that are participating in the information exchange. Note that tax may be reduced / offset if Indonesia has a treaty to avoid double taxation with the country where the income is derived. The world is becoming a smaller and smaller place...