Tax is one of the sources of state revenue that is used to ensure a proper redistribution of wealth and to prosper the entire people of the Republic of Indonesia. However, the tax authorities still have difficulties in performing their duties due to limited access to financial information from financial institutions. This is one of the biggest challenges for tax authorities in implementing tax amnesty policies.
As a manifestation of the seriousness of the government’s tax amnesty policy, the government of Indonesia has signed the Multilateral Competency Authority Agreement (MCAA), a legal commitment of the Government of the Republic of Indonesia to exchange automatic financial information (Aeol Standard) among 87 member countries of the Organization for Economic Co-operation and Development (OECD) for tax purposes. The financial services agency of the Republic of Indonesia will begin its customer identification in 2017, and it is expected that the government will conduct its first reporting in 2018 (“International Agreement”).
The Government is also obliged to ratify the International Agreement into law, therefore, the Government of the Republic of Indonesia has enacted Government Regulation in Lieu of Law No. 1 of 2017 on Access to Financial Information for Tax Interest (“PERPU 1/2017”) and revoke other regulatory provisions contrary to the disclosure of financial information. These include general provisions and procedures of taxation, banking, capital markets, commodity futures and sharia banking.
The Director General of Taxes is authorized to access financial information from the Financial Services Institution for the purposes of taxation. In addition, the Financial Services Institution must submit financial information for each financial account identified as a financial account consisting of:
a. Identification of financial account holders;
b. Financial account number;
c. The identity of financial institution;
d. Balance or value of financial accounts; and
e. Earnings related to financial accounts.
The information is managed by the Financial Services Agency for 1 (one) year (“Report”). The Director General of Taxes is also authorized to request information and/or evidence or information in relation to the Reports required by the Financial Services Institution. Such reports, information and/or evidence or information shall be used as a taxation database of the Directorate General of Taxation. Submission of Reports by the Financial Services Institution to the Director General of Taxes shall be conducted in coordination with the Financial Services Authority (“OJK”) through electronic, non- electronic, and other mechanisms determined by the Minister of Finance after clarification with the OJK Commissioner Board.
The Minister of Finance is authorized to coordinate with the tax authorities in other countries for tax purposes. In exercising its authority, the Minister of Finance shall have the right to exchange financial information including Reports and information and/or evidence or information with tax authorities in other countries.
The Minister of Finance, employees of the Minister of Finance, Head of OJK, employees of OJK, Head of Financial Services Institution, and employees of Financial Services Institutions cannot be prosecuted criminally and/or civilly liable in carrying out any actions pursuant to PERPU 1/2017 provisions. Financial Services Institutions are not allowed to serve customers or prospective customers who intend to open accounts and conduct transactions but refuse to comply with financial account identification.
Administrative sanctions of fines of up to Rp. 1.000.000.000 (one billion Rupiah), as well as criminal sanctions for the Financial Services Institution or the leadership or employee of the Financial Services Institution conducting, are imposed for:
a. Failure to submit a Report;
b Failure to perform proper financial account identification procedures;
c. Failure to provide information and/or evidence or information to the Report.
More significantly, anyone who provides false information or hides or deducts the actual information that must be submitted in the report may be subject to criminal sanctions and shall be liable to a maximum fine of up to Rp. 1,000,000,000 (one billion Rupiah).
CONCLUSION Since the enactment of PERPU 1/2017, the Customer of any Financial Services Institution is required to disclose financial information for tax purposes. The authority of the Director General of Taxes and the Minister of Finance shall have the freedom to access all information and assets owned by persons within the Republic of Indonesia. This will support the government’s tax amnesty program and hopefully increase State revenues through taxes.
The enactment of PERPU 1/2017 is a concrete manifestation of the Government’s desire to show an intolerance of money laundering through an illegal placement of funds and clear evidence that Indonesia is committed to its obligations under the International Agreement.
1. Financial institutions are defined as financial services institutions conducting activities in the banking sector, capital markets, insurance companies, other financial services institutions and/or other entities categorized as financial institutions in accordance with the standards of exchange of financial information under international agreements in the field of taxation.
17 Mei 2017 – 005/AP‐ LH/V/2017 -TWK-