Govt introduces amnesty in revised draft tax laws

Rendi A. Witular, The Jakarta Post, Jakarta

To encourage tax evaders to start paying their taxes -- in return for immunity from penalty and prosecution -- the government has provided a tax amnesty in its recently completed draft revisions of the tax laws.

In the draft revision for law on general taxation arrangements and procedures, the government will allow taxpayers to revise their tax statements and report their real earnings starting from the 2001 fiscal year until 2005.

If taxpayers accept the offer, the government will reduce or eliminate entirely all administrative penalties, as well as dropping any criminal charges.

"We are providing a kind of an initial tax amnesty facility for recalcitrant taxpayers in order to the expand taxpayer base as well as reap more tax revenue," Robert Pakpahan, a member of the tax laws revision team at the Ministry of Finance's Directorate General of Taxation, told The Jakarta Post on Tuesday.

He said, however, that the amnesty would be valid only during the first year of the implementation of the new tax law, which is scheduled to take effect next year.

"It is better for the government to try to collect the unpaid taxes by reducing or abolishing penalties against taxpayers rather than getting nothing from them," said Robert, adding that the offer would cover unpaid income taxes, value added taxes, luxury taxes and land and building taxes.

The deal is also good for individual as well as corporate and institutional taxpayers.

Details of the tax amnesty scheme will be outlined in a ministerial regulation.

Indonesia has a self-assessment tax system in which taxpayers are given the authority to state their own tax filings, with the tax office later cross-checking the filings.

The tax amnesty is meant to encourage people and enterprises to register as taxpayers without fear of prosecution for past tax debts.

As reported earlier, the Directorate General of Taxation recently completed the revision of Law No. 16/2000 on general taxation arrangements and procedures, Law No. 17/2000 on income tax and Law No. 18/2000 on VAT and luxury tax.

The revisions, the third major tax reform since 1983, will be submitted to the House of Representatives next month for deliberation.

The head of the tax law revision team, I Made Gde Erata, told the Post the government was still completing the draft of a special, separate law on tax amnesty.

That law would contain a wider tax amnesty mechanism that would cover all the way back to the 1980s.

"The facility in the upcoming laws is just an introduction for a wider and more comprehensive tax amnesty law that we are still preparing," said Erata.

He acknowledged that during the first year of the offer, there could be a potential loss of tax revenue. However, this loss would be made up for in the long run with a wider taxpayer base.

Many believe the amnesty is primarily aimed at luring back billions of dollars parked overseas by Indonesian conglomerates in the aftermath of the economic crisis to avoid paying taxes.

It is hopes these funds will revive the real sector and eventually absorb some of the unemployed. In addition, they would help the government reap more tax revenue from a vibrant corporate sector.