Indonesians' assets in tax havens abroad are estimated at $850 Billion

Indonesians' assets in tax havens abroad are estimated at $850 Billion 

Much-anticipated tax amnesty legislation passed Tuesday paves the way for the government to finance its infrastructure push by taxing funds stashed overseas by affluent Indonesians. The law frees tax evaders from past tax debts, as well as related fines and sanctions, as long as they voluntarily report or repatriate undeclared assets abroad by the deadline of March 31, 2017.

They need only pay so-called declaration or repatriation tariffs -- and the sooner they do, the less they fork over.

A person who repatriates assets between July and September will pay a rate of just 2%. This rises to 3% for repatriation carried out between October and December and 5% if it is done between January and March of 2017.

If assets are declared without being repatriated, then rates of 4%, 6% and 10% will apply for the same periods.

Repatriated assets will have to stay in-country for at least three years, with the law offering options for investing the funds in government bonds, bonds of state-owned enterprises, banks to be appointed later and infrastructure projects, among other things.

Indonesians' assets in tax havens abroad are estimated at 11,500 trillion rupiah ($850 billion) -- 30% of which is potential revenue for the state.

From the tax amnesty program running through March 2017, however, the government aims to pocket 165 trillion rupiah ($12.5 billion) in additional tax revenue.

This is expected to help the government meet its tax revenue target of more than 1,300 trillion rupiah this year, up 30% from last year, to finance President Joko Widodo's ambitious infrastructure development programs.

The government is optimistic that wealthy Indonesians will come forward, with the Automatic Exchange of Information regime slated to be fully up and running in 2018.

Developed by the Organization for Economic Cooperation and Development and the Group of 20, the new global standard of the AEOI will help fight tax evasion by allowing participating countries to access financial data on their citizens in other jurisdictions, including some well-known tax havens.

At least 1,000 people will declare or repatriate overseas assets once the law takes effect in July.

ERWIDA MAULIA, Nikkei staff writer