Indonesia is now in into the 3rd phase of their tax amnesty scheme. That was introduce in July of 2016 to help boost. The nation’s dwindling revenue by reclaiming previously unreported money. That were hidden by wealthy people in the United States and abroad.
The nation has struggled for a long time to increase tax revenue and has seen over 600,000 taxpaying. Taxpayers enroll in the scheme, earning an estimated $8 billion from the two initial phases of the scheme.
The first report period that ended in October last year was more than anticipated. Generating $7 billion, or about two-thirds of the revenue goal. In the second report period, which concluded on December 31, 2016, and resulted in a lower sum of $1 billion.
More than 27,000 new taxpaying citizens have been registered since the launch in the first phase of the programmer. It is yet to be determined if Indonesia will meet its tax amnesty objective at US$12.4 billion at the close in the 3rd. Phase of the program in March The achievement of the first phase led to financial experts to praise it as an example of one that is effective worldwide.
Exceeding Expectations Amnesty
Many people, including the IMF initially were skeptical about Indonesia’s chances of earning substantial revenue through the amnesty. However, the acceptance of the plan has removed doubts.
The amount of money that Indonesia has generated through it is much more than similar programs. Which have been introduced in other countries, like India, Greece, Germany and Canada.
One of the main factors that enticed a lot of Indonesians to disclose. Their assets was the low tax rate that the program charges. In the initial round it was only the tax rate of 2% on declared financial. Assets in Indonesia in addition to 4% on foreign assets. The tax rate rises incrementally over time, eventually reaching 10 percent for offshore assets in the third period.
The OECD has criticized the low tax rates in Indonesia because they were too generous to tax people who cheat. In September thousands of union members from Jakarta were protesting against tax-amnesty plan and criticized the way it grants pardons to wealthy tax cheats.
The government’s local financial ministry thinks that the low interest rates were the primary element behind the high adoption for the scheme.
Additional Incentives Amnesty
The Indonesian government ignores the sources of the money being report to make sure taxpayers benefit from the scheme. Also, it ignores the previous incorrect reporting of assets and guarantees confidentiality to participants in the amnesty programmer.
Some wealthy businessmen, like the CEO of the Lippo Group James Riady have publicly declared their involvement and have urged other businessmen to disclose their wealth too.
The tax amnesty program in Indonesia is perfectly time. In September 2017, the nation will begin sharing tax information with other countries as members of the Organization for Economic Cooperation and Development’s Automatic Exchange of Information initiative. This means that the country will begin receiving information regarding offshore assets held by its citizens from tax authorities that are part of the program. As of July 16 101 tax jurisdictions were join the program.
The new law will mean tax evaders will have to work difficult to conceal their financial data from authorities as banks won’t be allow to conceal information regarding their customers who not residents of the country.
The Last Part Of The Period
In the third quarter the the finance minister Sri Mulyani anticipates small and medium-sized enterprises to contribute significantly to tax revenues.
The majority of taxpayers benefiting from the first phase of tax amnesty are wealthy tycoons that had assets offshore The majority of the taxpayers who reported in the second phase of tax amnesty came from small and medium-sized businesses.
They contribute nearly US$196 billion which is 55.6 percent of Indonesia’s GDP, but the revenue in this second stage was 10 times lower than that of the first phase.
The program’s success therefore rests on the final cycle of reporting. Finance Ministers should work in conjunction with Ministry of Cooperatives and Small and Medium Enterprises to collect the names of companies and ask them to declare their assets.
Extending The Tax Amnesty Base
The achievement that the tax amnesty scheme to date is a positive effort to boost the tax revenues of Indonesia. However, If Indonesia is truly interest in increasing its tax revenues it needs to find ways to expand the tax base.
Indonesia has an estimated population of 250 million however only 26 million are register as tax payers. This is a small percentage that has led to the nation’s deficit in its budget. Estimated to be $25 billion in 2017, or approximately 2.41 percent of the GDP.
The government has a lot to do in order to educate the population on tax compliance. One of the things that it could do is to link tax compliance with moral or religious ideas. Religion plays an integral role within Indonesian society. The influence of religion can affect people’s behavior and make them less inclined to engage in tax fraud.
The research has revealed an association between religion and morale in the tax. System in Spain as well as The United States, and it could be the same in Indonesia.