JAKARTA: Indonesia must tell its taxpayers that the current tax amnesty is the last to avoid future evasions, the Organisation for Economic Co-operation and Development (OECD) said in a survey published on Monday about Southeast Asia’s largest economy.
Indonesia is offering a tax amnesty that will run until March 2017, intended to provide the government with billions of dollars in revenue to help cover a large fiscal deficit and expand the tax base.
The OECD said the timing of Indonesia’s current amnesty is good because “it provides taxpayers with opportunity to regularize past non-compliance prior to the entry into force” of Indonesia’s pledge to take part in Automatic Exchange of Information (AEOI) on tax-related activities with other countries in 2017.
“However, authorities must communicate clearly that this offer will not be repeated, and that henceforth, the AEOI will be used to locate undeclared assets and that full-penalties will apply,” it said. Indonesia granted tax amnesties in 1984 and 2008, OECD said.
Indonesia’s amnesty has drawn more than 420,000 participants to declare nearly $300 billion worth of assets so far. While many official say the figures indicate a successful program, they also underscore the low level of compliance.
Only 27.6 million people are registered taxpayers out of around 115 million working citizens in the country, finance ministry data showed.
The OECD warned that repeated amnesties in OECD countries have shown that amnesties tend to encourage tax evasion once the grace period is over.
It suggested that Indonesia should discourage future attempts to circumvent the tax system through strengthening tax administration.
The amnesty has so far generated 97.7 trillion rupiah ($7.51 billion) in government revenue, more than half of the government’s target.
OECD Secretary General Angel Gurria presented the report to Indonesia’s President Joko Widodo on Monday and Widodo told the OECD that Indonesia would implement reforms in its taxation system soon, according to a statement from the state palace.
In the same report, the OECD forecast Indonesia’s economic growth reaching 5.1 percent this year and 5.3 percent next year, citing downside risks from global factors. Growth in 2015 was 4.8 percent.
The OECD report also covered other subjects, including some recommendations on policy reforms in managing subsidies and liberalizing the importation of food.