Jakarta Globe – The Finance Ministry has relaxed rules for repatriating assets under government tax amnesty program in order to boost funds flowing into the country.
Amnesty participants can now bring in non-cash assets, like stocks or global bonds, to Indonesia and place them with local custodians. The participants can also use repatriated cash to inject capital into local companies, who will use the fund under its own discretion. Previously, the funds should be invested in local infrastructure projects.
Cash repatriation can be done in stages, but the countdown for the three-year lock up period, within which participants cannot move their funds abroad, would start only after all the funds repatriated, Robert Pakpahan, head of the debt management office at Finance Ministry, said over the weekend.
Under the tax amnesty program, banks can now liquidate offshore assets of taxpayers who default on their loan, giving leeway for lenders to recover losses.
In addition, it is now easier for participants to declare their assets repatriated between Dec 31 , 2015 to June 29, 2016, when the tax amnesty law became effective. It is also easier for them to declare profits from offshore investment, Robert said.
The government also cut paperwork to lessen administrative burdens at gateway banks, which manage the tax amnesty funds and reports.
“The relaxed rules take into account, among others, the fact many abroad assets are stocks or bonds,” Finance Minister Sri Mulyani Indrawati said over the weekend.
More than 45 percent of Rp 1,055 trillion ($8.7 billion) in declared offshore assets are stocks or bonds, as of Sunday (16/10). While cash, which is easier to repatriate, only accounted for 28 percent of the declared offshore assets. The other 20 percent of assets is in land, buildings or other immovable objects.
“So, that’s understandable why the assets cannot be repatriated as fast as we wanted,” Sri Mulyani said.
So far, amnesty participants have repatriated Rp 143 trillion of assets from abroad, only 14 percent of the government target of Rp 1,000 trillion. Most of the funds come from tax havens like Singapore, British Virgins Islands, Cayman Islands and other Asia-Pacific countries Hong Kong and Australia.
Yustinus Prastowo, the executive director at independent think tank Center for Indonesia Taxation Analysis said that Indonesians have difficulties in repatriating their funds from Switzerland, due to concerns over connection to money laundering or terrorist financing.
“I know that the finance minister is lobbying Switzerland so that the funds under tax amnesty program to be excluded from such suspicion. I heard that Indonesian businessmen are ready to repatriate Rp 150 trillion from there,” Yustinus said.