Indonesia Tax Amnesty Generates Megabucks For Infrastructure Programme

Indonesia President Joko Widodo is well on his way to finding the funds necessary for his ambitious infrastructure development plans with the Indonesia tax amnesty programme delivering results far better than expected.

Just three months into the programme it has been hailed as the most successful ever tax amnesty programme run by any government in world. In its first three months the Indonesia tax amnesty programme has seen the government collect a whopping 1,400 per cent more than a similar scheme run in 2008 by then president Susilo Bambang Yudhoyono (SBY) which only netted $500 million (Rp6.4 trillion*) in additional tax revenues.

In the first trimester of the Indonesia tax amnesty programme – when penalties were at their lowest – almost 330,000 taxpayers, including 15,000 new taxpayers, signed up to the programme. Up to the end of September some US$229 billion (Rp2.963 trillion) in previously unreported assets had been declared; a whopping 74 per cent of the government’s $308 billion (Rp4 quadrillion) target.

Of the almost $230 billion in unreported assets declared to date some $112 billion (Rp1.452 quadrillion), or almost half, was located in Singapore, with the balance held in safe-haven locations such as Switzerland, the Cayman Islands, Hong Kong, the Virgin Islands and Australia.

Penalties on the declared assets have seen the government pocket about $7.5 billion (Rp97.2 trillion), or 59.5 per cent of its $12.5 billion (Rp165 trillion) target.

Indonesia’s Unfunded Infrastructure Plans

Merak Port. Money from Indonesia tax amnesty programme will allow the Indonesian government to improve infrastructure such as this seaport in Java Photo: Courtesy of Wikipedia contributor Sakurai Midori

Earlier this year President Widodo outlined plans for a massive five year, $373 billion (Rp4.900 quadrillion) infrastructure development and modernisation programme consisting of more than 1,600 km (994 miles) of roads, plus ports, and railways to fast track economic growth.

With a fiscal deficit approaching $16.7 billion (Rp219 trillion), almost equal to the country’s self-imposed 3 per cent limit of Indonesia GDP, and just 27 million registered taxpayers out of a population of 255 million, the estimated $307 billion (Rp4 quadrillion) in undeclared assets kept offshore by Indonesians was seen as a lucrative source of funding.

With time quickly running out before a new, standard automatic information exchange system designed to combat tax evasion involving 94 countries comes into effect in 2018, the Indonesia tax amnesty programme is the last chance for many to ‘wash’ their undeclared assets at a bargain basement price.

Among the more than 330,000 people signing up to the scheme have some of Indonesia’s best known families, including Tommy Suharto, son of former dictator Suharto; the Thohir family, which has large holdings in car sales, energy, and banking; tycoon and chairman of Golkar, one of Indonesia’s major political parties Aburizal Bakrie, who is also ; and the Riady family, which owns Lippo Group, one of the country’s largest business conglomerates.

With almost six months left before the programme ends even some Indonesia tax amnesty programme detractors are saying the government’s revenue goals are likely to be met, or possibly exceeded, paving the way for Indonesia’s ambitious infrastructure programme to proceed at full speed.

Related: