Legal activists hope to block Indonesia’s tax amnesty plan

By Agustinus Beo Da Costa and Hidayat Setiaji

JAKARTA (Reuters) – Indonesian legal activists filed a request for judicial review on the country’s tax amnesty law on Wednesday, saying the government’s plan to bring home billions of dollars stashed overseas protects money launderers and tax evaders.

The tax amnesty, passed by parliament last month, has won widespread praise from investors and credit rating agencies that see the nine-month program as a way to recover much needed revenue and plug deficits in Southeast Asia’s top economy.

But activists see it as an illegal free pass for criminals looking to avoid punishment.

Legal aid groups One Justice Foundation and People’s Struggle Union said they filed the lawsuit to the Constitutional Court after President Joko Widodo signed it into law.

“Money stashed by giant tax evaders is suspected to be the result of crime so it was not reported as taxable income. Thus, [they are] subject to money laundering offense,” Sugeng Teguh Santosa, the head of One Justice Foundation, told Reuters.

Activists said the tax amnesty program contained at least 21 constitutional violations, and its implementation would hurt Indonesia’s anti-graft efforts.

A spokesman from the Constitutional Court said it had received the request for review and would hold a preliminary hearing 14 days after all the required documents are filed.

The lawsuit could create uncertainty over the implementation of the program and scare off some potential participants.

But policymakers defended the tax amnesty plan, saying the government and parliament carefully prepared the program to ensure there were no issues.

“[The law] has accommodated the aspirations from various parties, academic, practitioners, employers, and so on. That there are those who still want to sue or file a judicial review, that’s the right of the citizens,” Suahasil Nazara, head of fiscal policy office told Reuters on Wednesday.

“There is no need to worry that it will be voided,” Bank Indonesia Governor Agus Martowardojo told reporters earlier this week before the filing. “People’s response to the law has been positive.”

The tax amnesty program offers citizens low rates for paying some penalty on assets at home or abroad that have not been previously declared. The government is offering 2-5 percent rates for assets repatriated by March 2017.

Some $200 billion in Indonesian money is thought to be stashed in Singapore and wealth managers have been anxious an Indonesian amnesty might lead to an outflow of assets.

(Writing by Fransiska Nangoy; Editing by Randy Fabi and Sam Holmes)