Indonesia will soon implement new banking rules that will bring local regulations in line with an international agreement aimed at targeting tax cheats.
The new rules are in the final stages of preparation by financial authorities including the Ministry of Finance and the Financial Services Authority and will be available for President Joko Widodo for his approval by mid year, according to Detik.
Regulators will have access to bank balances as well as deposit and withdrawal history of foreign nationals located in Indonesia and abroad. In exchange, tax authorities will have access to similar data on funds held by Indonesian nationals overseas.
The changes are a step toward meeting the country’s obligation under the Convention of Mutual Administrative Assistance signed by the administration of the then president, Susilo Bambang Yudhoyono in 2011. That accord goes into effect next year.
The new rules are a boost to the administration of President Joko Widodo who is eager to lift government revenue as a slump in commodity prices guts the government’s taxes.
The government is eager to raise revenue by cracking down on tax cheats who hide funds in overseas accounts or by wooing the country’s rich to bring their assets home. It’s expected some holders of overseas assets will decide to transfer their funds to Indonesia rather than risk being turned in by foreign banking regulators.
The government has already had some success accessing foreign booty. The tax amnesty on funds squirreled away abroad, which wrapped up on March 31, helped raise US$10 billion in new revenue.
Since July 2016, more than 970,000 people took part in the amnesty program. Even so there are some individual and business evaders that did not participate.
Finance Minister Sri Mulyani Indrawati is considering stiff penalties for high net worth tax evaders. To help make ends meet in the meantime, the government is cutting national spending to reduce Indonesia’s fiscal deficit and rebuilt foreign exchange reserves.
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Image credits: Detik