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.