After decades of the “banking information secrecy” culture in Indonesia, local banks now seem more willing to share clients’ financial information to tax authorities (both local and foreign authorities). Earlier, Indonesian banks were reluctant to disclose this information as such transparency could mean banks would lose valuable clients. These “big clients” supply over half of banks’ deposits. However, the situation has now changed due to the government’s tax amnesty program.
In terms of asset declarations the government’s tax amnesty program (which runs until the end of March 2017) has been a success (asset repatriations from abroad, however, have been disappointing). With most of the big clients having declared their hidden assets under this program, there is less need for banks to keep clients’ data secret from Indonesia’s tax office. Therefore, it is now easier for Indonesian banks to comply with tax authorities’ wishes.
So far, more than 687,000 taxpayers in Indonesia joined the government’s tax amnesty program, declaring a total of IDR 4,500 trillion (approx. USD $337 billion) worth of (previously hidden) assets.
There is currently no law in Indonesia that forces local banks to disclose clients’ banking data to authorities. However, Indonesia announced its commitment to join OECD’s Automatic Exchange of Information (AEOI) in 2018. This AEOI is an initiative for tax information exchange among 100 jurisdictions designed to reign in tax evasion across the world. Therefore, Indonesia should now design laws that force banks to reveal clients’ data tax tax authorities.
Indonesian President Joko Widodo earlier said he plans to issue a government regulation to force transparency in Indonesia’s banking sector, hence bypassing the House of Representative (where the law-making process usually takes a long time, or fails, especially in case members of the House are negatively affected by new bills). This new regulation would combat tax evading in Indonesia and contribute to maintain financial system stability. Muliaman D. Hadad, Chairman of Indonesia’s Financial Services Authority (OJK), said the new regulation would make Indonesia on par with the global standard.