Pursuing Taxes from Hidden Assets in Other Countries

Penulis: Safrezi Fitra

Editor: Safrezi Fitra

21/12/2018, 04.14 WIB

Taxpayers, who have assets abroad and never reported it, will be subject to sanctions of 48 percent-200 percent of their tax obligations.

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The government will rely on Indonesian citizens’ assets and income, which have not been taxed so far, to pursue next year’s tax revenue target. Financial data obtained through Automatic Exchange of Information (AEoI) will be the basis for pursuing taxes from the assets that are hidden abroad.

The tax revenue target (taxes and customs) next year is high at Rp 1,786.4 trillion, rising 15.36 percent compared to this year’s projected realisation of Rp 1,548.4 trillion. It will mostly come from taxes. Therefore, more effort is required to reach the target.

During a meeting related to the discussion of the 2019 budget with Indonesia’s parliament, the Minister of Finance Sri Mulyani Indrawati said tax growth would only reach 8.5 percent if its movement refers to the assumption of economic growth in the range of 5 percent and inflation of 3.5 percent. With this ambitious tax revenue target, the Directorate General of Taxation have to make innovations in order to pursue it.

It is indeed difficult to pursue the tax revenue target, if it only relies on economic assumptions. According to DDTC Fiscal Research, the realization of 2019 tax revenue will not reach the target if it still relies on the economic assumptions. DDTC Tax Researcher Bawono Kristiaji estimates next year’s tax revenue to be around Rp 1,450 – Rp 1,491 trillion.

“Tax revenue realization is only between 91.9 percent and 94.5 percent from its target of Rp 1,577.6 trillion,” he said in the press conference on the 2019 Tax Sector Outlook and Challenges - Competing for Taxpayers’ Vote at DDTC Tower, Jakarta, Thursday (12/13).

Bawono said the realization of next year’s tax revenue can exceed DDTC’s predictions if the government is able to pursue revenue from taxpayers who save their assets abroad by using the AEoI program. The implementation of AEoI between countries aims to give the government the power to track potential taxes abroad. This system allows the exchange of cross-country taxpayer account information.

Minister Sri said there are important progress in cooperation between countries in their efforts to increase tax revenue. Some of them are Base Erosion Profit Shifting (BEPS) and AEoI agreements as well as digital economic taxation.

So far, the rich have taken advantage of tax haven countries and loopholes in regulations between countries to avoid taxes. “Indonesia will utilise all of the cooperation to improve tax compliance and increase the tax base,” Sri said in early December 2018.

The AEoI program kicked off last September. Up to now, the Directorate General of Taxation has obtained financial data from 65 countries, including several tax haven countries. “We have received financial data from countries such as Panama, Cayman Islands, Bahamas, Guernsey, Singapore, and Hong Kong,” Taxation Directorate General Spokesman Hestu Yoga Saksama told Katadata.co.id on Friday (12/7).

However, the AEoI implementation has not provided significant impact on this year’s tax revenue realisation. The Directorate General of Taxation still needs to process the data that has been received in two to three months. This means that they can only use it at the end of 2018 or early 2019. Thus, the impact can only be seen in tax revenue next year.

AEoI is a commitment from member countries of the Global Forum on Transparency and Exchange of Information. The essence of its implementation is the automatic exchange of account or customer information – in the context of Indonesia belongs to Indonesian citizens – with tax authorities of treaty partners.

The data exchanged between Indonesia and other countries in accordance with the AEoI agreement has been regulated in Law No. 9/2017 on the exchange of customer data. Based this law, five data elements can be exchanged: identity of account owner, account number, identity of financial institution, account balance, and income earned from the account (interest).

The Directorate General of Taxation will use the data to pursue tax revenue that is still not touched so far. Data from the AEoI program are believed to be able to improve taxpayer compliance in paying their obligations. This program has the potential to increase tax revenue from corporate and personal income tax (PPh).

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