Tax windfall: Indonesia’s amnesty

From The Economist Espresso


As government offices reopen after the Eid al-Fitr holiday, tax-dodgers have the chance to come clean. A new scheme initially allows them to pay just 2% tax on assets they bring back from abroad—a big discount on the top tax rate of 30%. The longer they delay during the nine-month amnesty, the worse the terms. The repatriated assets must be kept in Indonesia for three years, invested in designated banks or bonds. Falling natural-resources revenues have strained government finances, and the deficit is testing a legal limit of 3% of GDP. The finance ministry says, optimistically, that the amnesty will raise $12 billion—still a sliver of the perhaps $900 billion Indonesians are thought to hold abroad. But the biggest long-term gain would be boosting the tax base. Indonesia has fewer than 30m registered taxpayers out of a population of 250m. And only about 1m actually pay.