After a long process, the Tax Amnesty Law was finally passed at a House of Representatives plenary session on June 28. At the same time, the plenary also approved the revised 2016 state budget.
Amid widespread concerns over the impact of Britons’ vote to leave the EU, known widely as “Brexit”, on the global economy, the endorsement of this law provides immediate positive sentiment, as reflected in the stock market (IDX) and the exchange rate. The stock price index continued to strengthen to reach the psychological threshold of 5,000, last seen in June 2015. The rupiah also continues to appreciate against the US dollar, hovering at around 13,100 per US dollar.
The government is optimistic that additional tax revenue from the tax amnesty can reach Rp 165 trillion (US$12.5 billion), assuming around Rp 4 quadrillion will be declared and Rp 1 quadrillion will be repatriated into the country. With this target, the fiscal deficit is expected to stand at Rp 296.7 trillion, or 2.35 percent of the country’s gross domestic product (GDP), compared with the previous target of Rp 273.2 trillion, or 2.15 percent of GDP.
If implemented effectively, this program has the potential to boost economic growth. With the repatriated funds flowing in and locked in the country for at least three years, the direct impact of the program is a stronger exchange rate, as investors will seek rupiah-denominated assets.
In addition, the market capitalization of shares and bonds will also increase, along with the sources of funding for corporations to invest or expand. Sales in the property sector are also likely to increase, especially with the recent easing of loan-to-value (LTV) ratios for home mortgages as of August.
This will encourage the growth of various supporting industries for the property sector, such as cement, steel, glass, home furnishings and bank lending, as well as boosting employment.
The problem of taxation in the country is often associated with the technical aspects of implementation, ranging from a reliable database to the level of taxpayer compliance. In the Tax Amnesty Law, the provisions for implementation will be regulated further through a finance minister regulation currently being formulated by the Directorate General of Taxation and set to be issued immediately.
Related to this, there are at least three things that need to be anticipated and regulated in the regulation. These include Bank Persepsi, repatriation funds and procedures.
As it stands, the law requires taxpayers to transfer and invest their funds through Bank Persepsi, a commercial bank designated by the minister to accommodate redemption payments or repatriation funds transferred to Indonesia. Given the variety of investment instruments that can be used by taxpayers, asset management and securities companies under Bank Persepsi should be positioned as a gateway.
To streamline repatriation and optimize the potential of repatriation funds, it is necessary to add the provisions in the ministerial regulation that offshore gateways can open amnesty accounts as long as the taxpayer purchases investment products that have underlying assets in Indonesia.
Repatriated funds can currently be invested in government securities, state-owned enterprise bonds, state-owned financing company bonds, financial instruments in Bank Persepsi, private company bonds — the trading of which is supervised by the Financial Services Authority (OJK) — infrastructure investments through government cooperation with business entities, investment in the real sector based on the priorities set by the government through a ministerial regulation and other investment instruments.
In the regulation, it is suggested that the instruments could be expanded to other instruments as well, such as stocks, real estate investment trusts, dual currency investment, mutual funds, limited participation funds, asset-backed securities and discretionary funds.
The availability of these instruments in the market will increase flexibility and help investors to invest in the instruments that match their risk profile. The regulation should also stipulate that all insurance products are to be excluded from the tax amnesty.
To ensure the monitoring of repatriation funds during the locked-in period, there needs to be specific accounts in all gateways that will allow easy monitoring and reporting in a timely manner. All transactions related to the tax amnesty must be operated through the special account, including transactions related to dividend payments, capital gains and interest income. One of the facilities that can be used by the taxpayer is a trust account.
It is as such suggested that trust accounts currently regulated by the OJK be allowed to be used as tax amnesty accounts. This should be specifically allowed for use by individual taxpayers looking for inclusion in the amnesty, which is currently only allowed for specific corporate bodies (e.g. oil and gas firms). Given that the tax amnesty is to last for just nine months, it is relevant to suggest fast-tracking product approval for specific products (during the tax amnesty only) that Bank Persepsi may come up with between now and March 2017.
To ensure smooth implementation, tax amnesty procedures associated with the fund transfer need to be made easier, but still conform with regulations. In this sense, there are three things that need to be considered.
The first is related to reporting. Assuming there are offshore taxpayers willing to repatriate, then it would be easier if filing for non-residents could be done through offshore gateways. Second has to do with information regarding fund transfer between gateways. If a customer moves funds from one gateway to another, he is required to notify the current gateway prior to the transaction being executed. This will help to anticipate the risks related to liquidity management.
The third relates to the principle of know your customers (KYC). It is important to ensure that the gateways are not used as a means to launder money. In the scenario that the taxpayer fails to pass a gateway’s KYC, the taxpayer can change his status from repatriation to declaration. By doing this, Bank Persepsi, asset management and securities companies will avoid any risk to their reputations.
The effectiveness of the tax amnesty should be strongly encouraged given the magnitude of its revenue target, which has been used as one of the basis assumptions of state revenue in the revised 2016 budget. Missing the target would increase the fiscal deficit ratio, ultimately reducing the government’s credibility in managing the state budget. Full support from the banking sector, capital markets and asset managers, and especially from the regulator itself, will determine the success of this program.
Penulis: Bobby Hermanus
Sumber: thejakartapost
http://www.pengampunanpajak.com
Kategori:Tax Amnesty in English
PENGAMPUNAN PAJAK 
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