Singapore Denies Allegations Regarding Indonesia's Tax Amnesty Program
Singaporean authorities deny that the nation's banks offer incentives to Indonesian clients to keep their assets stashed in Singapore. Last week, reports started to circulate in local Indonesian media claiming that Singaporean banks offer to finance the difference between interest paid on the declaration of assets kept in Singapore and the interest paid on the assets repatriated to Indonesia. Indonesia is eager to see the repatriation of offshore funds (stashed in so-called tax havens) through the tax amnesty program. It is estimated that some USD $200 billion worth of Indonesian funds are kept in Singapore.
Indonesia launched its tax amnesty program earlier this month (a program that will run up to 31 March 2017). Through this program tax evaders can come clean by declaring and - if wanted - repatriate their funds to Indonesia. In return, they are offered attractive tax rates as well as impunity from penalties or prosecution. If a tax dodger declares his offshore assets to Indonesia's tax office, then he will be charged a tax tariff between 4 - 10 percent. However, if he decides to bring the assets into Indonesia (and keep these assets in Indonesia for at least three years in specific investment instruments), then the tax tariffs are halved. As such, it is more attractive to transfer the funds into the home country.
Last week, reports surfaced that Singaporean banks had offered their Indonesian clients to finance the difference between those two tax rates provided that assets would remain in Singapore. However, a statement from Singapore's Ministry of Finance and Monetary Authority denies such allegations and emphasized that the nation is fully committed to internationally agreed standards regarding the combat of money laundering and the exchange of information to prevent or tackle (suspected) cross-border tax evasion.
Tax Amnesty Program Indonesia - Tax Tariffs:
| Period | Tax Tariff |
|
| Declaration of Funds | 1 July - 31 September 2016 | 4% |
| 1 October - 31 December 2016 | 6% | |
| 1 January - 31 March 2017 | 10% | |
| Repatriation of Funds | 1 July - 31 September 2016 | 2% |
| 1 October - 31 December 2016 | 3% | |
| 1 January - 31 March 2017 | 5% |
Source: Indonesian Finance Ministry
There may be up to USD $200 billion worth of Indonesian assets stashed in Singapore (a huge amount given that Singapore's private banks manage a total of about USD $470 billion worth of assets). However, we estimate that only approximately 10 percent will be repatriated from Singapore under Indonesia's tax amnesty program. The program is not that appealing to Indonesian businessmen as they will need to keep assets in Indonesia for at least three years in investment instruments that have been prepared by the Indonesian government and financial authorities (for example bonds, stocks and real estate).
Another unappealing matter is that tax incentives under Indonesia's tax amnesty program only apply to historical tax liabilities. Meanwhile, new income is to be taxed at the normal rates (that are significantly higher compared to the rates in tax havens).
Do you think that Indonesia's tax amnesty program will be a success?
Voting possible: -
Results
- Yes, I do (50.6%)
- No, I don't (32.8%)
- I don't know (16.6%)
Total amount of votes: 2421
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