WHAT is the best design for a tax amnesty? Some object to them all, since they reward those who have broken the law. Others argue that maximising revenue should be the goal. The OECD nods at both philosophies, suggesting that an amnesty should cost the tax-dodger less than if he were caught by the authorities, but more than if he had been compliant from the start. Few, however, would recommend the approach Indonesia is taking.
The government estimates that rich Indonesians have perhaps $900 billion stashed overseas. To entice some of that money home, it wants to offer an amnesty. Parliament, which reconvened this week, is due to take up a bill soon. People who have hidden assets abroad will face no criminal prosecution or penalties, other than a flat fee of between 1% and 6% of their value, depending on how quickly they declare their assets and whether they repatriate them. (1% is for those who bring their money home immediately; 6% for those who take more than nine months to admit their stash and keep it abroad.) Yet even 6% is a bargain compared with Indonesia’s top tax rate of 30% for companies and 25% for individuals. Scofflaws should see the...Continue reading
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