Don’t worry, Jakarta tells tax amnesty applicants flagged by Singapore banks

Singapore's Central Business District. Pic: Flickr/Brian Evans

JAKARTA officials are urging taxpayers not to be overly concerned by reports that Singaporean banks have reported to local police the names of those participating in Indonesia's tax amnesty program.

Jakarta Post wrote Saturday that the state palace believes that Singapore would not hinder the implementation of the program.

Cabinet Secretary Pramono Anung told those with money parked in Singapore they need not fear signing up for the program as participation would not be considered tax evasion.

Furthermore, the official pointed out that Finance Minister Sri Mulyani Indrawati had already spoken to her counterpart in Singapore about the matter.

"Thus, anyone who puts their assets in Singapore and wants to join the tax amnesty, whether in the form of assets repatriation or declaration, please do not be afraid because the applicable law is the Indonesian tax regulation," he was quoted saying in Jakarta Friday.

The same assurance was offered earlier by Sri Mulyani during an unplanned press conference in the capital, the newspaper reported Thursday night.

Indonesia's Finance Minister Sri Mulyani Indrawati. Pic: AP.

The minister, responding to reports about the move by Singapore's banks, revealed that she had even contacted the island state's authorities for a response on the matter.

"I directly checked with Singaporean authorities, specifically Deputy Prime Minister Tarman to get official explanation from the Singaporean government," she was quoted saying in Kompas, according to Jakarta Post.

Sri Mulyani said the Singaporean government responded by telling her that they had encouraged all banks in the country to support clients wanting to join Indonesia's amnesty program.

In an exclusive report earlier, Reuters quoted several Singapore banking sources as revealing that private banks were sharing with local police the names of the clients who have embraced Indonesia's tax pardon.

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The Jokowi administration rolled out the controversial tax amnesty program on June 28 in a bid to offset an impending budget shortfall on the back of sluggish economic growth and poor annual tax collection rates.

The government hopes that the program would help it bring home some IDR165 trillion (US$12.5 billion) of the country's wealth currently parked by its citizens overseas.

Under the program, Indonesians are offered low penalty rates for assets abroad or at home that were not previously declared. A Bloomberg report said the rate changes in stages, beginning from 4 percent for declared assets that taxpayers choose to leave overseas, and up to 10 percent as the program draws to a close in March 2017.

Those who agree to repatriate their assets for a minimum three-year period are offered a rate of just 2 percent, as well as investment opportunities.

Concerns were raised previously that the program would lead to a massive outflow of assets from Singapore, where Indonesians are believed to have stashed some US$200 billion in private banking assets, which accounts for 40 percent of the island's total, according to reports.

Reuters in its exclusive noted that Singapore made tax evasion a money-laundering offence in 2013 and tightened rules further after the investigation on Malaysia-owned 1Malaysia Development Berhad (1MDB) revealed that some of its banks had failed to highlight dubious money movements.

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Under rules stipulated by Singapore's Financial Action Task Force (FATF), banks are required to file a suspicious transaction report (STR) whenever a client participates in a tax amnesty scheme.

But the Monetary Authority of Singapore (MAS) told Reuters that participation in any such tax amnesty scheme would not trigger a criminal probe in Singapore.

"The expectation for an STR to be filed on account of a client participating in a tax amnesty program should therefore not discourage clients from participation," it was quoted saying.

Noting this, Sri Mulyani said Indonesians need not worry about taking part.

Bloomberg said today that so far, Indonesians have declared IDR117.3 trillion (US$8.9 billion) of assets held in Singapore under the government's tax amnesty.

Of the total Singapore assets declared, however, only IDR14.1 trillion, or 12 percent, has been repatriated, the report said, quoting Indonesia's Finance Ministry.

Source: Don't worry, Jakarta tells tax amnesty applicants flagged by Singapore banks