LAST year Indonesia’s finance minister, Sri Mulyani Indrawati, invited chief executives, directors and shareholders from the country’s leading industries to banquets at her ministry. As they munched, she would give presentations setting out who among them had—and, by omission, who had not—signed up to the government’s tax amnesty. “This may be the most expensive dinner in your lifetime,” the 54-year-old economist recalls telling them.
Indonesia’s tax amnesty, which began in July 2016, ended on March 31st. More than 800,000 evaders declared 4,700trn rupiah ($350bn) in assets previously hidden from the authorities. That is a staggering sum, equivalent to 40% of Indonesia’s GDP and 90% of the money supply, and revealing of the epic scale of tax-dodging.
The willingness of tax cheats to come clean partly reflects the generous terms on offer. Assets declared in the first three months were taxed at just 2-4%, compared with the individual income-tax rate of up to 30%. Those declared in the next three months were taxed at 3-6%, and those in the final three months at 5-10%. The government collected additional revenue of 125trn rupiah, equivalent to less than…Continue reading