BI against easing of banking secrecy

BI against easing of banking secrecy

The Jakarta Post, Jakarta

Bank Indonesia joined on Thursday a chorus of objections in
response to a proposal to relax the banking secrecy code, saying
it would shatter confidence in the banking sector and even
provoke capital outflows.

"People might lose confidence in banks and then stash their
funds abroad," Bank Indonesia senior deputy governor Anwar
Nasution told reporters.

Anwar added that the banking secrecy had recently been relaxed
to help the investigation on money laundering, terrorist funds
and corruption. "Whatever the Ministry of Finance asks in that
regard, we'll follow."

But, he doubted that applying a similar treatment for tax
collection purposes was the best possible solution, as the
country still needed to retain confidence in the banking sector.

The House of Representatives budget commission earlier this
week recommended that the government relax the banking secrecy
code to help increase tax revenues. Under this proposal, the tax
office would have access to taxpayers' bank accounts.

Several lawmakers said some taxpayers might have reported less
than their actual wealth to avoid paying taxes. Relaxing the
banking secrecy code and allowing access to individuals' bank
accounts would thus increase tax revenues, so that the current
failure to meet the tax revenue target would not recur.

Tax revenues are expected to total Rp 248.5 trillion this
year, falling short of the initial target of Rp 254.1 trillion,
with the non-oil and gas income tax target falling from Rp 106.1
trillion to Rp 104.3 trillion.

However, the recommendation has so far met with objections
from various parties, including Minister of Finance Boediono and
the ministry's Director General for Taxation Hadi Purnomo, for
fear that it would ruin the hard-won public confidence in the
banking sector, which has yet to fully recover from its lows
following the banking crisis in the late 1990s.

Anwar said relaxing the banking secrecy code would also
require an amendment to the country's Banking Law.

Under the existing law, the bank is protected by secrecy
code, which, could only be opened by other parties in
extraordinary conditions, such as those related to corruption,
money laundering or terrorist activities.