RI highlights fair, transparent tax practices at G20 forum
Indonesia is demanding healthy, fair and transparent taxation practices at the recent G20 meeting in Chengdu, China, as the country struggles to widen its stubbornly narrow tax base.
Finance Minister Bambang Brodjonegoro intervened in the G20 High Level Tax Symposium by stating that the Indonesian government wanted fair and transparent taxation globally among small and big countries, including jurisdictions that usually become tax havens.
The country’s stance was firm that it wanted healthy competition in terms of taxes applied among countries, said the Finance Ministry’s head of policy harmonization and analysis, Luky Alfirman.
“Characteristics and needs of taxation are different among big and small countries,” he told journalists Tuesday. Small countries’ needs for funding from taxes are relatively small compared to bigger states.
The government of Indonesia, the largest economy in Southeast Asia, is highly dependent on tax revenues, which account for about 85 percent of state income every year, but its tax-to-gross domestic product (GDP) ratio has only revolved around 9.6 percent to 11.9 percent in the past decade, despite President Joko “Jokowi” Widodo’s intention to boost it to 16 percent.
Meanwhile, small countries could tinker with their tax rates as they had fewer challenges in terms of revenues, while big countries like Indonesia could not, said Syurkani Ishak Kasim, the Finance Ministry’s Fiscal Policy Agency (BKF) multilateral and climate change policy head, who attended the G20 meeting.
“This is not the only initiative. The G20 carries out several others to make international taxation become fairer, in which big and small countries’ tax strategies will not harm each other,” he told journalists.
Indonesia is struggling to bring home funds stashed by wealthy Indonesians in tax haven countries and Singapore, which offer low tax rates. It is offering tax amnesty to taxpayers until next March and expects Rp 1 quadrillion being repatriated in the program. About US$200 billion that may not have been declared to the Indonesian tax authorities has been squirreled away in Singapore, Reuters reported.
Meanwhile, Syurkani said Indonesia also intervened in the preparation of an automatic exchange of information (AEOI) slated to start in 2018. It demanded full implementation of the system to all countries and jurisdictions, as well as sanctions on those that are not compliant.
Upon its implementation, the AEOI will provide a transparent exchange of non-resident financial account information with tax authorities in the account holders’ countries of residence.
“Member countries welcomed the intervention and incorporated it in the communique,” Syurkani said. The G20 would instruct other international institutions, such as the Organization for Economic Cooperation and Development (OECD), to implement the communique.
The G20 finance ministers and central bankers’ communique showed their support toward countries and international organizations to work on the issues of pro-growth tax policies and tax certainty.
“We recognize the important role of tax policies in our broader agenda on strong, sustainable and balanced growth and of a fair and efficient international tax environment in diminishing the conflicts among tax systems,” the communique reads.
