Indonesia’s tax amnesty is being widely described as the most successful of its kind anywhere in the world. As of March 31, $366.6 billion had been declared, compared with a $300 billion target. It is rare that Indonesia sets a target and beats it by 20%.
|Sri Mulyani Indrawati|
The assumption, when the amnesty was announced, was that it was going after the billions of dollars and trillions of rupiah squirrelled away offshore, chiefly in Swiss and Singaporean banks – mostly in Singapore.
Yet according to information released from Indonesia’s ministry of finance, to date, $276 billion of that $366.6 billion of declarations involved money that was onshore. The offshore declarations, at $79.4 billion, are considerable, no question about it. But they represent just 21.7% of the total. Four out of every five dollars disclosed in the amnesty has been hiding in plain sight in Indonesia.
The other thing that leaps from the data is that declaring it a success depends very much on how one measures success. As a disclosure, it beat all expectations. But the hope was that the money would be repatriated too. In fact, the $11.2 billion of repatriations represents only 15% of that target (perhaps because most of it turned out not to be offshore after all, so there was nowhere to repatriate it from).
And the tax penalties – the bit that was supposed to support Indonesia’s ambitious infrastructure spending – weigh in so far at $8 billion of collections. Very handy indeed, but 63% of what Indonesia is hoping for.
As for the private banks in Singapore, most are putting a positive spin on this. They all saw outflows around the amnesty, in some cases running in to the billions, but it appears to be a one-off hit (and, under the terms of the amnesty, might come back in a few years anyway). Bankers present it all as the cleaning of their books; that perhaps a few problems that their own compliance processes might have missed will go away through the repatriation of capital.
For Indonesia the windfall is welcome. But for lasting change, the country needs to build on this and improve its tax collection ratio – a clear priority of finance minister Sri Mulyani Indrawati, who wants to lift it from 11% to 15% by 2020 (the global average is 14.8%, according to the World Bank). It is a big but necessary ask.