Cabinet secretary Pramono Anung told Indonesian citizens, who account for an estimated $200bn (£153bn, €179bn) – or 40% - of total private banking assets managed in Singapore, that they will not be prosecuted for tax evasion for using the amnesty despite more stringent reporting standards by Singaporean regulators.
Singapore tightens rules
The guarantee comes a week after Reuters reported that Singapore‘s Commercial Affairs Department (CAD), a police unit that deals with financial crime, told banks last year they must file a suspicious transaction report (STR) whenever a client takes part in a tax amnesty scheme.
The rigorous disclosure measures were further reinforced by the Monetary Authority of Singapore (MAS) after the money-laundering scandal of Malaysia’s state-backed fund 1MDB exposed how some of its banks failed to impose robust controls on suspicious money flows.
Indonesia’s government is hoping the tax amnesty programme, launched in June, will make up some of the shortfall in tax revenues hit hard by sluggish economic growth and poor collections rates.
Under the amnesty, Indonesians can pay a tax rate starting at 4% on declared assets that they choose to leave overseas. The rate increases in stages to 10% as the programme draws to a close in March.
Indonesians who agree to repatriate their assets, for a period of at least three years, are offered a rate of only 2%, as well as a range of possible investments.
Poor repatriation rates
According to Bloomberg on Monday, the amnesty has delivered only a fraction - 18% - of the hoped-for revenue, prompting doubts of its success.
Indonesia’s finance ministry revealed on Friday, $8.9bn of assets held in Singapore have been declared, although just $107m - or 12% - of that figure has been repatriated back to Indonesia.