Minister says not feasible to relax banking secrecy

The Jakarta Post, Jakarta

A proposal from legislators to relax existing regulations on banking secrecy principles -- while worthy of consideration -- is seen as unfeasible for immediate implementation, Minister of Finance Boediono said on Wednesday.

"It (the proposal) is still a discourse, a thought. We'll see how we can accommodate that at the right time, but not at the moment.

"We'll look into it more closely later on," Boediono told reporters.

He was commenting on a recommendation made by the House of Representatives' budget commission to provide the tax office with greater access to the bank accounts of tax payers to check for the validity of their actual wealth, which in turn should help increase tax revenue collection. According to some lawmakers, certain tax payers might have under valued the true size of their wealth to avoid paying tax.

The country's banking law stipulates that the liability side (deposits) of a bank is protected by the secrecy code. Only in certain cases can details of a account be disclosed. For instance, in a corruption case where a suspect has been named, then the Attorney General's Office or the Supreme Court can request disclosure.

Taking this into consideration, the lawmakers have recommended the easing of the banking secrecy ruling, although they left it to the government to determine what ruling to relax.

The legislators argued the recommendation was needed after learning that this year's tax collection target had to be revised downward to accommodate the shortfalls.

However, Boediono was of the opinion that the proposal would only put in jeopardy the hard-gained public confidence in the banking sector, something that might prompt another round of capital outflows.

Supporting Boediono's statement, Directorate General for Taxation Hadi Purnomo also objected to the proposal, saying an amendment to the existing banking law must be done first before the proposal can be applicable.

The House's recommendation came following claims by the government that the tax revenue target could not be met, due partly to the estimated shortfall in non-oil and gas income tax.

Tax revenues are expected to reach Rp 248.5 trillion in total 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.