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Economy

Indonesia's tax amnesty reaches second deadline

Progress registering undeclared wealth still falling short of budget

The Indonesian tax department headquarters in Jakarta was overflowing with amnesty applicants on the last Friday of the year.

JAKARTA -- On Friday morning, the quietness of Jakarta's usually traffic-clogged streets is a sign of the holiday season, except in one bustling spot: the tax office.

More than 600 people have been waiting on the second floor of the tax department's second-floor headquarters since it opened at 7:30am to register undeclared assets under a tax amnesty.

The size of the crowd has ballooned in the final days of a second deadline that exempts individuals from criminal charges if they pay a small penalty on hidden assets. After Jan. 1, the penalty rises to 5% of the value of declared domestic assets from 3%, and to 10% from 6% for those offshore.  

Some tax office staff will be working until midnight on Dec. 31, a Saturday, to accommodate last-minute declarations.

A woman who runs a builders' merchant business in Jakarta said she had been waiting for nearly three hours to submit her report. "I visited yesterday but had to come back because my documents were incomplete," she said.

Indonesia launched its tax amnesty program in July to try and get traction on a chronic national low compliance problem. The budget shortfall is hampering President Joko Widodo's efforts to implement major infrastructure spending. The government has said it will go after tax evaders once the amnesty ends, and plans to exchange information with offshore financial centers like Singapore or Hong Kong, where many rich Indonesians have undeclared wealth stashed.

Finance Minister Sri Mulyani Indrawati has stepped up efforts to reassure those worried about revealing their wealth. During an impromptu visit to the tax office on Thursday, she gave instructions that accountants and tax consultants, whose businesses have flourished since the program began, have reported their own assets correctly.

"Accountant offices that have no taxpayer numbers won't be reprimanded," Indrawati told local reporters. "We will simply revoke their permits if needed."

Despite significant progress, most economists expect revenue generated from the tax amnesty to fall short of the government's target. Nevertheless, the exercise has confirmed the scale of tax evasion by wealthy Indonesians. Assets declared since the program was launched in July 2016 total 4,200 trillion rupiah, which equates to about 73% of the country's stock market.

"The tax amnesty is not only important to increase short term revenue but also to expand the taxpayer base," said David Sumual, chief economist at Bank Central Asia.

The amnesty program is due to end on March 31.

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