Finance Ministry to Limit Automatic Bank Information Exchange

From left to right, Bank Indonesia Governor Agus Martowardojo, Chief Economic Minister Darmin Nasution, Finance Minister Sri Mulyani Indrawati and OJK Chairman Muliaman Hadad at a press conference in Jakarta on Thursday (18/05). (Antara Photo/Sigid Kurniawan)

By : Tabita Diela | on 11:20 AM May 19, 2017
Category : Business, Featured, Banking/Finance

Jakarta. Local banks may soon only be required to share information on large accounts to the tax office, as the government tries to limit risks from automatic bank information exchange, the Finance Ministry said on Thursday (18/05).

The government already enacted a government regulation in lieu of law last week which requires local banks to share bank account information automatically with the tax office.

The regulation effectively nullifies Indonesia's banking secrecy law in a move to reform the country's tax system and fulfill the country's pledge to join the Automatic Exchange of Information (AEOI), a global initiative to combat tax evasion.

Critics, however, raised concerns that the regulation may increase the risk of disclosing sensitive information to unauthorized parties.

Finance Minister Sri Mulyani Indrawati said the ministry is now drafting a ministerial regulation that will rule on how bank information would be collected and managed. The ministerial regulation is expected to be issued by the end of next month.

"I understand people might be worried that now the Directorate General of Taxes has the authority to acquire sensitive financial information, which may lead to misappropriation," Sri Mulyani said on Thursday.

"But rest assured, officials at the Directorate General of Taxes who have access to such information will be subjected to an internal disciplinary ruling. The information should not be used to serve personal interests, or to intimidate and scare taxpayers," Sri Mulyani said.

By limiting the automatic information exchange to large account holders, the tax office will find it easier to maintain secrecy. According to Indonesia's Deposit Insurance Corporation, or LPS, there are 239,318 accounts that contain more than Rp 2 billion ($150,000) as of February 2017. To put it into perspective, there is a total of 202.2 million savings accounts in the country.

Sri Mulyani did not disclose what the threshold will be for an account to be classified as large enough to warrant automatic reporting. But she said countries that have signed up for the AEOI have agreed to automatically report information on accounts containing more than $250,000, or the equivalent in local currency, to their tax authorities.

"We will consult with the Financial Services Authority [OJK] and other financial institutions to come up with an ideal regulation that could be implemented efficiently without alarming financial institutions and the public," Sri Mulyani said.

The regulation had caused a slight drop on bank stocks on Wednesday despite claims by the banks that they were ready to comply with it.

"We hope the public can accept [the new regulation]," OJK Chairman Muliaman Hadad said. "The tax office should treat the data as confidential information. There are also protocols that will ensure the data stay confidential. As long as we comply with them, there should be no problem," Muliaman said.

 

 

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