This content is from: Local Insights

Indonesia

The new ministerial cabinet of Indonesia, headed by the president, Susilo Bambang Yudhoyono, has announced its objectives for its first 100 days in power.

Included among them is tax law reform, including amending and revoking certain provisions that are detrimental to the business and investment climate. This includes a proposal to introduce a tax amnesty (discharging tax obligations) for long-time tax evaders who fail to voluntarily reporting tax obligations under the self-assessment tax return. Scholars say that specific legislation will be needed to achieve this, and, judging from the time period needed to revise the tax laws, they consider it impossible to introduce such legislation within the first 100 days. The criteria for the tax amnesty must be carefully defined in the legislation to avoid misuse of this privilege. This legislation will not be the first reference to tax amnesty since it has been referred in Law re State Revenue and Expenditure Budget of 2001 until 2003, Presidential Decree No 26 of 1984 re tax amnesty and Minister of Finance Decree No 345 of 1984 re implementation for tax amnesty in conjunction with Minister of Finance Decree No 966 Year 1983 re adjustment factor for the calculation of income tax.

Although the Indonesian Chamber of Commerce endorses the proposal, the incumbent minister of finance, Jusuf Anwar, has decided that the government is not yet ready to provide a tax amnesty. But he has admitted that a tax amnesty may possibly extend the tax ratio. So in the preliminary draft of the law regarding tax amnesty, the Department of Finance will review the readiness of all legal instruments, tax administrations, including its information technology systems and tax enforcement units. The draft states that bail-out or ransom tariffs will be imposed as a penalty and a reporting requirement of the tax obligor's wealth and assets should be implemented to remedy the state fiscal revenue in return for the amnesty granted. It also states that the tax obligor should be free and clear from tax examination or tax inspection and also free and clear from investigation of potential fiscal crime, unless new evidence is discovered.

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