Business owners claim they have not signed up for the tax amnesty because they need time to review the scheme and are waiting for new rules from the government. They are also calling for an extension of the scheme, which is scheduled to end in March next year.
Secretary of the Advisory Board of the Association of Indonesian Employers (Apindo), Chris Kanter, said that taxpayers still need more information from the government to understand the details of the tax amnesty scheme, which came into effect on 18 July.
Meanwhile, derivate technical regulations from Law No. 11/2016 on the Tax Amnesty in the form of Finance Minister regulations were only issued when the scheme had already started. The government has released four such regulations: No. 118/2016 on implementation of the tax amnesty law; No. 119/2015 on the procedure for repatriating funds and their placement in investment instruments in the financial market; No. 122/2016 on the procedure for repatriating funds and their placement in investment instruments outside the financial market; and No. 123/2016, which revised No. 122/2016.
According to Chris, however, these regulations are insufficient. “Lots of big asset owners need more regulations,” he told Katadata, Tuesday (23/8), including a regulation on special purpose vehicle (SPV) auto body manufacturers. (Read: Sri Mulyani: Large Inflow of Tax Amnesty Funds in September)
He explained that many wealthy taxpayers owned SPV body companies overseas. Some of them were mentioned in the confidential “Panama Papers” leaked by financial services company Mossack Fonseca a few months ago. If these technical regulations are issued, Chris said that business owners would be able to look at them in detail and would be prepared to sign up to the tax amnesty scheme.
Last Friday (19/8), the Finance Ministry’s Director General of Cost and Risk Management Robert Pakpahan said the government was drawing up a regulation of the Finance Minister for SPV body manufacturers to make it easier for taxpayers to declare and repatriate their funds. This regulation should be issued in one or two weeks.
According to Robert, the structure of these Indonesian-owned SPV auto body manufacturing companies varied. For example, some adopt single-layer nomination, or are in the name of one party who can immediately do a transfer of title. But others adopt multi-layer nomination. This makes it difficult to close these auto body manufacturers to repatriate their assets to Indonesia.
For these reasons, Chris suggests extending the duration of the tax amnesty, in particular the first quarter when the penalties are low, which is due to end at the end of September. “It would be good if the first stage could be extended to November,” he said.
He added that some of the implementing regulations were not finalised until August and time is needed to explain them to taxpayers. For example, the regulation on transferring repatriated funds to real sector instruments, such as land, buildings and gold.
Also, large asset owners need time to withdraw their funds from investment instruments overseas. “This process takes time,” said Chris. So, he thinks that if the first period of the tax amnesty only lasts until September, it will be difficult for the government to get a significant amount from the scheme.
The problem is that the tax amnesty has been divided into quarters in the provisions of Law 11/2016 which was passed by the House of Representatives (DPR) in July. Previously, Finance Minister Sri Mulyani said that while she was prepared to draw up tax amnesty implementing regulations, the law could not be revised.
“If you asked that the regulations of the Finance Minister be revised, I’m sure that would be fine. But I need time to do that. What I can’t change is the law, which has been passed (by the DPR),” she said.
For that reason, Chris suggests that the government issue a regulation in lieu of a law (Perpu), to be able to extend the duration of the tax amnesty. (Read: Director General of Tax Waiting for Big Taxpayers to Boost Tax Amnesty Revenue)
Tax observer from the Center for Indonesian Taxation Analysis (CITA) in Jakarta, Yustinus Prastowo thinks the government could consider this proposal, although he doubts that the tax amnesty will be extended just to boost revenues. “At least it (having a Perpu) would be better.”
According to the Directorate General of Tax website, as of Tuesday (23/8), total assets in the tax amnesty scheme amounted to IDR 53.1 trillion, comprising IDR 51.4 trillion in declared assets, in Indonesia and overseas, and IDR 1.71 trillion in repatriated assets. The government’s target for declared assets is IDR 4,000 trillion, and for repatriated funds is IDR 1,000 trillion.
As a result, state revenue from tax amnesty penalties are currently IDR 1.06 trillion, or just 0.6 percent of the target of IDR 165 trillion.