Finance Minister Sri Mulyani (left), accompanied by Finance Deputy Minister Mardiasmo (right), gives information on financial information access disclosure for tax purposes in Jakarta on Friday (9/6). The Finance Ministry guarantees that the access to information given to the Directorate General of Taxation will only be used for the purposes of tax.
JAKARTA, KOMPAS – Indonesia’s Directorate General of Taxation (DJP) has signed a bilateral cooperation agreement with the tax authorities of Hong Kong for the implementation of the Automatic Exchange of Information (AEOI) for tax purposes beginning in September 2018.
Director General of Taxation Ken Dwijugiasteadi and Commissioner of Inland Revenue Department of Hong Kong Wong Kuen-fai signed the Bilateral Competent Authority Agreement (BCAA) at the Head Office of Inland Revenue Department, Hong Kong, on Friday.
The consul general of Indonesia’s Foreign Affairs Ministry in Hong Kong Tri Tharyat witnessed the signing of the cooperation agreement.
Out of 100 countries or jurisdictions, which have agreed to implement Automatic Exchange of Information (AEOI) on tax matters, 90 countries have signed the Multilateral Competent Authority Agreement (MCAA). It means that these countries no longer need to sign bilateral cooperation agreements to implement AEOI.
While 10 other countries or jurisdictions agreed only to sign the BCAA. Thus, to apply AEOI with these 10 countries or jurisdictions, the signing of a bilateral agreement is needed. One of the countries or jurisdictions in this group is Hong Kong.
"With the signing of the BCAA, the Indonesian government through DGT has access to obtain financial information of Indonesian taxpayers who have financial accounts in Hong Kong," the director of Public Counseling and Public Relations at DJP, Hestu Yoga Saksama, said.
With the cooperation agreement, DGT will be able to check taxpayer compliance more accurately and at the same time to encourage taxpayers to fulfill their tax obligations voluntarily. It concerns, among others, compliance with the reporting of income and financial assets abroad.
Yoga added that the signing of the bilateral agreement on financial information exchange with Hong Kong was made possible after Indonesia implemented a Government Regulation in Lieu of Law (Perppu) No. 1 of 2017 on financial access for tax purposes beginning May 8, 2017.
The Hong Kong tax authority issued local regulations for AEOI on June 30, 2016.
Important
Yoga said the agreement would be very important for Indonesia to be able to implement AEOI with Hong Kong, because based on data from the Investment Coordinating Board (BKPM) Hong Kong is fourth largest investor in Indonesia.
In 2016, Hong Kong’s investments in Indonesia reached US$2.2 billion in 1,137 projects. While based on data from the recent tax amnesty program, Hong Kong is one of the favorite places for Indonesian citizens to keep their assets abroad.
In the tax amnesty program, Hong Kong was the third largest source of repatriation funds, with Rp 16.31 trillion. Hong Kong was also the third largest source of value of declared assets, with Rp 58.15 trillion.
Separately, the Executive Director of the Center for Indonesia Tax Analysis (CITA) Yustinus Prastowo said DGT should also sign bilateral agreements with other relevant countries or jurisdictions.
However, he warned, the government should immediately ensure the House of Representatives (DPR) have received the Perppu No. 1 of 2017 on the access to financial information for tax purposes. "Don’t sign an agreement with other countries if the DPR has yet to receive the Perppu. If so, bilateral agreements with other countries can be canceled," Prastowo said.
In implementing AEOI, a country should issue at least a regulation in lieu the law as its legal umbrella. The government has said it has submitted the Perppu to House members for approval.
