Tax amnesty offers more gain than pain: Govt

Rendi A. Witular, The Jakarta Post, Jakarta

Despite concerns about violating the public's sense of justice, the government is optimistic a planned tax amnesty will bring more gain than pain to the country's ailing economy.

Coordinating Minister for the Economy Aburizal Bakrie estimated that once the amnesty was implemented, the government could earn Rp 50 trillion (US$5.3 billion) in revenue from penalties imposed on tax evaders in return for immunity from prosecution.

"The government will earn revenue from penalties imposed on parties that have evaded their taxes for years," he said at the State Palace on Tuesday.

Apart from imposing penalties, the tax office, according to a 2001 regulation, is allowed to jail tax evaders for up to a year without trial.

The tax office has detained at least three tax evaders.

"This policy (tax amnesty) will, at the same time, lure Indonesian conglomerates to reinvest money currently parked overseas back in the country," Aburizal said.

Indonesian conglomerates are estimated to have parked billions of dollars overseas in the aftermath of the mid-1997 financial crisis to avoid paying taxes.

Aburizal said that if the conglomerates brought the money back, the new investment would help revive the sluggish corporate sector.

"Those funds could revive the real sector and eventually absorb some of the unemployed. In addition, the government would also reap more tax revenue from the vibrant corporate sector," he said.

The tax amnesty is part of the government's efforts to expand the taxpayer base by encouraging parties that have not paid taxes for years to begin paying their taxes in return for immunity from prosecution for tax evasion.

As of last year, the tax office collected Rp 238.9 trillion in revenue -- about Rp 300 billion more than had been targeted.

The planned tax amnesty is one of the government's top priorities, initiated by Aburizal, who is a former chairman of the Indonesian Chamber of Commerce and Industry (Kadin).

Kadin, the country's most powerful business lobby, has been promoting the idea of a tax amnesty for the past two years as part of a comprehensive tax reform proposal that it submitted to the government.

Vice President Jusuf Kalla acknowledged recently that the government was preparing a draft bill on the tax amnesty, to be forwarded to the House of Representatives for deliberation.

However, Aburizal denied the government had discussed the amnesty plan in detail.

Sources at the Ministry of Finance said the amnesty would cover both individual and corporate taxpayers, and they would be able to settle unpaid tax bills by paying between 10 percent and 20 percent of their total tax arrears.

For corporate taxpayers, the proposed amnesty would cover unpaid taxes between 1995 and 2003. The government is still undecided on the time period for individual taxpayers.