JAKARTA: Indonesia this month is winding up one of world’s most successful tax amnesties, with at least 745,000 taxpayers declaring more than $330 billion of assets so far.
President Joko Widodo has cited higher tax revenue as the key to boosting infrastructure spending and growth. But if the amnesty is to avoid being just a one-off windfall, Indonesia needs to improve a tax collection ratio well below many of its peers, international agencies and local officials have said.
To that end, Indonesia’s finance minister Sri Mulyani Indrawati has set up a special tax reform team to boost collection. It faces an immense task in a country where tens of millions of people remain outside the tax system.
Parliament is considering draft legislation that would overhaul an institution the public views as one of Indonesia’s most corrupt, according to global corruption watchdog Transparency International.
“People don’t pay taxes because they believe they won’t get caught,” said Darussalam (like many Indonesians, he goes by one name), a partner at consultancy Danny Darussalam Tax Centre.
The amnesty has provided the government with more revenue than similar plans in countries such as India, Chile, Italy or South Africa, Indrawati said.
The amnesty has been criticized for benefiting mostly the rich. The World Bank blames poor tax compliance amongst high income earners in Indonesia for hampering poverty reduction and maintaining inequality. The richest one percent of Indonesia’s 250 million people control nearly half the wealth, charity organization Oxfam said.
