US$76 billion worth of Indonesian-owned assets held overseas

The Indonesian government is going all-out to promote a tax amnesty program amid jitters from Singaporean bankers, who are estimated to hold tens of millions in assets spirited overseas, and by reformers, who say the amnesty gives fugitives too good a deal.

The program is aimed at rich Indonesians who have undeclared assets overseas, with President “Jokowi” Widodo leading the campaign in several cities to try and convince prominent businesspeople to take part.

Jokowi held several “meet and greet” with entrepreneurs in Central and West Java to discuss the government’s flagship program to repatriate Indonesian assets parked overseas and increase tax revenues.

The program is designed to catch big tax evaders who have massive assets overseas but who have never declared them in Indonesia. According to the law, taxpayers who are the object of the tax amnesty program are individuals or corporations that have taxation rights and obligations in accordance with existing taxation regulations.

Under the amnesty scheme, the government seeks to bring about the return of an astonishing Rp1 quadrillion (US$76 billion) worth of Indonesian-owned assets held overseas and to recoup at least Rp165 trillion in penalty payments that it plans to use to plug the holes this year’s state budget deficit.

Businesspeople who repatriate their assets will enjoy a redemption rate ranging from 2 to 5 percent of the assets, while those who declare their assets will get a 4 to 10 percent rate.

“I am optimistic with this program. I do not talk numbers, but most importantly public trust in the government is shown. I also saw their compliance and awareness to pay the taxes. This is a very good movement,” Jokowi told economists and businesspeople who attended a lunch meeting at the State Palace recently.

The Indonesia’s House of Representatives agreed to pass the tax amnesty bill into law during a plenary session bathed in interruptions from lawmakers back in June. In total, nine party factions agreed to the formation of the Tax Amnesty Law.

The Jokowi government hopes the first period of the program, which began on July 1 and runs until the end of September, can attract a large number of participants. Its second period is scheduled from Oct. 1 to the end of December.

Several conglomerate and prominent business owners in Indonesia are joining the program. Names such as Murdaya Poo, Hutomo Mandala Putra—better known as Tommy, son of the late president Suharto – former Indonesian Employers Association (Apindo) chairman Sofjan Wanandi, property magnate James Riady, Triputra Group founder TP Rachmat, as well as media mogul Erick Thohir.

“I have been waiting for the amnesty for years. The tax amnesty will ease the burden of my children who will inherit my fortune and people who work for our firms,” Murdaya Poo told journalists after filing his tax amnesty.

He then called on fellow businesspeople to follow suit, assuring them tax officials were helpful. Poo also said that he would repatriate all of his offshore assets and declare them.

The Finance Ministry’s Directorate General of Taxation said 1,929 new taxpayers have registered since Jan. 1 to participate in the amnesty program, contributing Rp 6.86 trillion (US$522 million) of declared assets and Rp123.24 billion in redemption.

As of Sept. 5, Rp 223.89 trillion in assets have been declared with redemptions at Rp 4.78 trillion. Of declared assets, Rp175.21 trillion came from domestic declarations while Rp 35.60 trillion came from overseas. Meanwhile, repatriated assets were recorded at Rp 13.08 trillion. Asia Times