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Indonesia: Tax Amnesty Passed

(July 6, 2016) On June 28, 2016, Indonesia’s House of Representatives adopted a tax amnesty bill. The amnesty was described by Bambang Brodjonegoro, the Minister of Finance, as beneficial to the economy because it would increase asset repatriation, support the currency, help lower interest rates, and increase domestic investment. The government plans to issue three regulations to implement the amnesty. (Govt to Issue Supporting Regulations for Tax Amnesty, JAKARTA POST (June 30, 2016); RUU Tentang Pengampunan Pajak [Bill on Tax Amnesty], Prolegnas Prioritas (2016) [Priority Legislation (2016)], House of Representatives website (last visited July 1, 2016).)

These regulations will contain procedures and requirements for carrying out the tax amnesty program, which was expected to come into effect following the end of Ramadan and remain in force until next March. (Ayomi Amindoni, Govt Selecting Private Banks to Become Tax Amnesty “Cashiers,” JAKARTA POST (July 1, 2016); Ayomi Amindoni, Credit Card Data Collection Plan on Hold Amid Tax Amnesty, JAKARTA POST (July 1, 2016).)

The amnesty program is focused on encouraging the return of the large amounts of Indonesian assets now kept abroad. Under the revised tax provisions, declared assets that are repatriated for the purpose of investment will be subject to a tax rate of 2% of net value, but assets returned to Indonesia and not destined for investment will be subject to a 4% rate. These taxes are expected to directly raise additional funds for the government of over US$12.3 billion. (Govt to Issue Supporting Regulations for Tax Amnesty, supra; Constance Johnson, Indonesia: Tax Amnesty Proposed, GLOBAL LEGAL MONITOR (May 10, 2016).) Brodjonegoro noted that the government will designate specific state-owned and private banks to receive the repatriated funds. (Govt Selecting Private Banks to Become Tax Amnesty “Cashiers,” supra.)

Bank Indonesia, the country’s central bank, estimated that the repatriated funds will amount to the equivalent of $42 billion, with more to be invested in real estate than in stocks and bonds. The Bank further forecast that the tax benefits would increase economic growth for 2016 by 0.3%, causing that estimated growth to reach as high as 5.4%. (Harry Suhartono, Tax Amnesty Seen Unlocking Gains in Indonesian Property Stocks, BLOOMBERG (June 7, 2016).)