Turkish Tax News
Bülent TAŞ
25 April 2016Bülent TAŞ

Tax Amnesty: Indonesian Plan, Turkish Experience

An article has been published in latest version of The Economist (April 9th 2016) under the heading Tax amnesties -Making Crime Pay. Article is about the tax amnesty offer planned by Indonesian Government. Indonesian Government estimates that rich Indonesian have perhaps $900 billion outside the country. In order to encourage these rich people to bring back some of that money; Government is planning to offer a tax amnesty. According to the offer people who have hidden assets abroad will face no criminal prosecution or penalties, other than a flat fee of between 1% and 6% of the value of the assets in question, depending on how quickly they declare and whether they repatriate it. 1% is for those who bring their money home immediately. 6% is for those who take more than 9 months to admit to hiding assets and keep them abroad. Indonesia’s government projects $8 billion-$15 billion in revenue from the skim.

When I read that article I remember Turkey’s similar experience. Turkey has introduced similar skim in 2008 to encourage to wealth people to declare and bring back their money to Turkey. Fee rate was 2% of the value of the asset. That time it was argued that Turkish People have $100 - $150 billion hidden money outside Turkey. Purpose was to bring back some part of the money and also generate revenue for budget. Result was not as good as it was expected. Only $19 billion wealth has been declared. It is not clear how much of the declared amount has been transferred to Turkey. $367 million fee has been assessed on the declared value. Only 65% of the assessed fee has been collected.

It might be argued that it is better than nothing. We all know that it is easy to measure what value tax amnesty bring, but it is very difficult to measure what value it takes away. The value which is gone is like the asset hidden outside the country. But regaining this value is more difficult.

Comment form