May 17, 2017 2:20 am JST

Indonesia gives tax office access to financial accounts

Regulation issued to join global framework targeting cross-border tax evasion

WATARU SUZUKI and ERWIDA MAULIA, Nikkei staff writers

People wait at a help desk for tax amnesty at the country's tax headquarters in Jakarta on Sept. 30. © Reuters

JAKARTA -- Indonesia has granted the nation's tax office access to financial information held by banks and other institutions, the country's latest move to join a global framework designed to curb tax evasion.

The new regulation, known as a Perppu, has not been made public but was signed by President Joko Widodo on May 8 and took effect immediately, according to a tax office spokesperson.

Indonesia's director general of taxes now possesses "the authority to access financial information for tax purposes" at financial services institutions -- including banks, stock brokerages and insurance companies, a copy of the regulation shows.

These institutions are "obliged" to submit reports to the tax office that are "in line with standards of financial information exchange based on the international agreement on taxation." The reports should contain information such as the identities of account holders, their balance and income. The regulation also covers reporting mechanisms and timelines.

The requirements extend to anything "identified as financial accounts that must be reported" under the Automatic Exchange of Information framework developed by the Organization for Economic Cooperation and Development, according to the regulation. Those who fail to comply will be subject to criminal charges and face up to one year in jail or a fine of 1 billion rupiah ($75,190).

Indonesia's government has worked to meet regulatory requirements that will enable it to participate in AEOI. Aimed at curbing tax evasion, the framework lets tax authorities in participating countries exchange data on foreign taxpayer accounts automatically.

The tax office plans to begin exchanging information in 2018, but has admitted that revisions in the banking law as well as various technical regulations are required. A Perppu, or regulation in lieu of law, can bypass slow parliamentary procedures and needs only the president's signature, though it is subject to possible parliamentary debates and votes later. 

Tax officials have pledged to use the AEOI framework to crack down on those who did not participate in Indonesia's nine-month amnesty program, which ended in March. The amnesty gave immunity from prosecution to taxpayers who declared previously hidden assets and paid a small penalty. It resulted in the declaration of 4.88 quadrillion rupiah ($365 billion at the time) in assets -- equal to nearly 40% of the country's GDP.

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