Indonesia Update: Indonesia Issued Regulation Granting Tax Authorities Access to Financial Information

Indonesia Update | May 18, 2017
Authors: Kim Yaeger, Artha Sirait and Ian Saccomanno
 
LOOKING AHEAD
 
 

Indonesia International Conference on Tourism Investment (May 23-24): The Indonesian Investment Coordinating Board (BKPM), Ministry of Tourism and the Government of North Sulawesi Province are hosting the International Conference on Tourism Investment in Manado from May 23-24. The conference will be opened by President Joko Widodo; the conceptual master plan and specific opportunities will also be presented. Please click here for more information.

 
THE COUNCIL'S TAKE
 
 

Indonesia Issued Regulation Granting Tax Authorities Access to Financial Information

On May 8, President Joko “Jokowi” Widodo signed Government Regulation in lieu of Law No. 1 of 2017 (available in Bahasa Indonesia), granting the nation’s tax office access to financial information held by banks and other qualified institutions such as stock brokerages and insurance companies. These institutions are to submit reports to the tax office “in line with standards of financial information exchanged based on the international agreement on taxation.” The report should contain information such as the identities of account holders, cash balances and financial gains to name a few. Previously, in order to access a taxpayer’s account, the tax authorities must first receive an approval from the Financial Service Authority (OJK) and it can only be done for investigation purposes.

The regulation is in the form of a government regulation in lieu of law (Peraturan Pemerintah Pengganti Undang-Undang - PERPPU), an expedited government regulation equivalent to a law, with immediate effect - initiated by the president without prior approval by the House of Representatives, which is allowed in the event of a compelling emergency. Such regulation, however, must be approved by the House at its next session, otherwise it may be repealed. On Thursday, the government has sent Government Regulation in lieu of Law No. 1 of 2017 to the House. 

In late February, President Jokowi stated that the urgency of the new regulation is to prevent taxpayers from hiding their assets in Indonesia and overseas. It would complement Indonesia’s involvement with the Automatic Exchange of Information (AEOI) policy along with 100 other countries, due to be implemented by 2018 in Indonesia. The AEOI initiative was created through discussions within the G20 and the Organization for Economic Co-operation and Development (OECD). Indonesia’s tax authorities have previously stated their intention to use the AEOI framework to crack down on those who did not participate in the tax amnesty program, which ended in March 2017. The tax amnesty program generated IDR135 trillion (approximately USD10.16 billion) of additional tax revenue, equivalent to 1.08 percent of Indonesia’s GDP.

Jakarta Governor Ahok Found Guilty of Blasphemy, Deputy Djarot now in Charge

On May 9, the North Jakarta District Court sentenced Jakarta Governor Basuki “Ahok” Tjahaja Purnama to two years in prison, having been found guilty of blasphemy, in violation of Article 156 of the Indonesian Criminal Code. Ahok’s sentence was harsher than expected, in which the judges appeared to have ignored the prosecutors’ recommendation for a lesser charge. The ruling has triggered various reactions and opinions from many parties including lawmakers across Southeast Asia. Charles Santiago, a member of the Malaysian Parliament and chair of ASEAN Parliamentarians for Human Rights stated that “the verdict is deeply disconcerting not only for Indonesia but for the entire ASEAN region. Indonesia was thought to be a regional leader in terms of democracy and openness.” The reaction from the Indonesian public has been divided; the business communities’ perspectives are also divided with some showing strong public support for the governor and some others supporting the District Court’s verdict. Meanwhile President Joko “Jokowi” Widodo has called on the public to respect the court’s ruling and to respect the country’s legal process.

In 1965, former President Soekarno enacted Presidential Decree No. 1/PNPS/1965 which became popularly known as the “blasphemy law”, which was later incorporated into the Indonesian Criminal Code by former President Soeharto in 1969. Indonesia has since flirted with the blasphemy law for decades and a number of well-known Indonesians have been charged under this law as a result – a prominent case being Arswendo Atmowiloto who was jailed for five years when he was the Editor-in-Chief of a well-respected newspaper in the 90s. Historically, very few people have ever been cleared of charges under this law. The blasphemy provision, along with all criminal provisions in the Indonesian Criminal Code apply to anyone located in the jurisdiction of Indonesia regardless of citizenship status.

Ahok was taken into custody immediately after the verdict since under Indonesia’s Procedural Code, he was not eligible to remain free during an appeal process because he had faced a possible sentence of five years or more. His Deputy, Djarot Saiful Hidayat, will now serve as the acting governor for the remainder of their term which ends in October this year. They are to be succeeded by Governor-elect Anies Baswedan (former Minister of Education under President Jokowi’s administration) and Deputy-elect Sandiaga Uno. On May 12, Attorney General HM Prasetyo stated that the prosecutors have appealed the District Court’s verdict, a move he believes is in accordance with the existing laws and is not out of the ordinary. The prosecutors’ appeal to the Jakarta High Court aims to challenge the District Court’s legal basis to punish the governor. Ahok himself has previously stated his intention to appeal and when asked by the press, his attorneys stated that they have received the notification of the prosecutors’ appeal on May 16.

 
 
IN THIS UPDATE
 
 

Regional Affairs
Japan, New Zealand to Work Together to Revive TPP
ASEAN economic community opens greater job opportunities in the region
Jokowi to attend Arab Islamic American Summit in Riyadh 
Asean Maintains Stability, Peace Amid Rising Geopolitical Tension: WEF
Jokowi, Jinping witness signing of three agreements
Young Population, Growing Digital Economy Will Bring Prosperity to Asean: WEF
Openness Key to Growth and Development: US Ambassador
Indonesia wants better economic ties with the US, industry minister says


National Affairs
Prosecutors appeal Ahok's verdict
Foreign Ministry responds to international concerns on Ahok conviction
Jokowi sees maritime resources as Indonesian future

ASEAN
Coal projected to be largest source of power in ASEAN by 2030

Defense & Security
Russia wants to barter Sukhoi for Indonesian rubber
Russia offers turnkey nuclear plants to Indonesia: Luhut

Energy
Oil and gas losing ground to renewables
Six gas sale and purchase agreements signed
Govt issues regulation on flare gas
Indonesia forces new oil and gas contractors to reimburse earlier investment
5,000 MW mine-mouth plants to be offered at auction
Arcandra to meet lenders to develop new, renewable energy
Arcandra defends gross split in oil production sharing system
Minister Jonan inaugurates gas network in Surabaya
PLN eyes turning to nuclear if renewable energy goal fails

Financial Services
Banking information access regulation sent to House
Government issues regulation to end bank secrecy
Gov't Gives Tax Office Access to Accounts at Financial Institutions
Indonesia gives tax office access to account information at financial institutions - official
BI Projects May Inflation at 0.27%
Indonesia sets a cap on how much foreign cash can be carried in

Food & Agriculture
Government certifies only 1 million plots of land as of May
Agricultural infrastructure development to continue: President
Govt to control garlic imports following price increase
Indonesia targets to stop corn import this year

Health & Life Sciences
Sandiaga Calls on Jakartans to Fight against Tobacco Industry
Indonesia ministry seeks to extend forest moratorium by two years

ICT
Minister Says Internet Data Plans Must be Affordable, Sustainable
Indonesia prone to cyberattacks: Expert
Government chooses Mimika to be one of Indonesia`s smart cities

Infrastructure
Terminal 3 ready to fully serve Skyteam members in June
Indonesia, China consortium sign $4.5 bln loan for rail project
Minister plans to open Maluku-Darwin shipment line
President Jokowi to inaugurate three projects in Jayapura

Manufacturing
Car manufacturers eye higher exports
Growth of manufacturing industry falls short of expectation: BI

Thailand
Thailand's PTTEP suspends Indonesia investment over oil spill case

 
ARTICLE CLIPS
 
 
Regional Affairs

Japan, New Zealand to Work Together to Revive TPP Tempo 17th May 2017
Japanese Prime Minister Shinzo Abe and his New Zealand counterpart, Bill English, on Wednesday said they would work together to bring to fruition the Trans-Pacific Partnership, or TPP, even after the United States ditched the free trade pact.

ASEAN economic community opens greater job opportunities in the region Antara News 16th May 2017
The Association of Southeast Asian Nations (ASEAN) Economic Community framework can create more job opportunities in the blocs member countries, Director of ASEAN Economic Cooperation from the Ministry of Foreign Affairs Ade Petranto stated.

Jokowi to attend Arab Islamic American Summit in Riyadh  The Jakarta Post 16th May 2017
Leader of the world's biggest Muslim-majority country President Joko "Jokowi" Widodo is set to attend the Arab Islamic American Summit in Riyadh, Saudi Arabia on Sunday, a top official has confirmed. Saudi Arabian Ambassador to Indonesia Osama bin Mohammed Abdullah Al Shuaibi said on Tuesday that Jokowi would participate in the first ever summit to be held between leaders of Muslim-majority countries and US President Donald Trump, which aims to decouple Islam's image from terrorism.

Asean Maintains Stability, Peace Amid Rising Geopolitical Tension: WEF Jakarta Globe 15th May 2017
Southeast Asia has done well to maintain stability and security within its own region amid challenging geopolitical situation, Cambodian Prime Minister Hun Sen said on Thursday (12/05) at the World Economic Forum in Phnom Penh, Cambodia.

Jokowi, Jinping witness signing of three agreements Antara News 15th May 2017
President Joko Widodo (Jokowi), on a working visit to China, met with President Xi Jinping here on Sunday discussing promotion of bilateral economic cooperation, and witnessed the signing of three cooperation agreements between the two countries.

Young Population, Growing Digital Economy Will Bring Prosperity to Asean: WEF Jakarta Globe 12th May 2017
A young population and the prospect of a growing digital economy are expected to bring prosperity to people in Southeast Asia, participants in a panel discussion at a World Economic Forum event in Phnom Penh, Cambodia, said on Thursday (11/05).

Openness Key to Growth and Development: US Ambassador Jakarta Globe 12th May 2017
United States Ambassador Joseph Donovan has emphasized the importance of openness to the rest of the world for economic growth and development. Speaking at a public seminar titled "From Drill Bit to Digital Bytes: Thoughts on a Stronger US-Indonesia Economic Relationship" in Jakarta on Wednesday (10/05), Donovan said Indonesia benefits from an "open, inclusive approach that welcomes US entrepreneurs and executives to work" in the country.

Indonesia wants better economic ties with the US, industry minister says CNBC 11th May 2017
During his visit to Indonesia last month as part of his tour of Asia, Pence met with Indonesian President Joko Widodo to discuss bilateral trade ties between the U.S. and Indonesia.

National Affairs

Prosecutors appeal Ahok's verdict The Jakarta Post 16th May 2017
Prosecutors have formally appealed the North Jakarta District Court's decision to sentence Jakarta Governor Basuki "Ahok" Tjahaja Purnama to two years in prison for blasphemy.

Foreign Ministry responds to international concerns on Ahok conviction Antara News 10th May 2017
The Ministry of Foreign Affairs has responded to international concerns over Jakarta Governor Basuki Tjahaja Purnamas conviction by asking all the parties to respect the verdict of the court in the blasphemy case. "We should respect the law of Indonesia. We, as the government, cannot intervene in the legal process," Arrmanatha Nasir, Spokesperson of the Ministry of Foreign Affairs, said here, Wednesday.

Jakarta governor Ahok found guilty of blasphemy CNN 9th May 2017
In April, prosecutors had called for the blasphemy counts to be dropped in exchange for a lesser charge of "spreading hate," but the judges appear to have ignored that recommendation. The controversial Chinese Christian politician was put on trial in December over accusations that he insulted Islam while campaigning for re-election. He repeatedly denied the charges. He said he would immediately appeal the court's decision.

Foreign reserves rise to US$123.1 billion in April The Jakarta Post 8th May 2017
Capital inflows increased Indonesia’s foreign exchange reserves to US$123.1 billion in April, the highest level since at least 2015. The increase in April was mainly supported by foreign exchange earnings, including from the repatriated funds in the government’s tax amnesty, oil and gas export proceeds as well as Bank Indonesia’s (BI) auction of foreign exchange securities (SBBI), the central bank said in a statement on Monday. “BI considers that the foreign reserves are able to support the country’s external side and maintain sustainability of economic growth going forward,” it wrote.

Jokowi sees maritime resources as Indonesian future The Jakarta Post 8th May 2017
President Jokowi “Jokowi” Widodo has said Indonesia has to seriously start exploiting maritime resources, which he believes are the future of the country’s economy. He said there is only a small part of maritime resources worth Rp 17 quadrillion (US$1.28 trillion) annually that could be exploited.

ASEAN

Coal projected to be largest source of power in ASEAN by 2030 The Jakarta Post 18th May 2017
Following increasing demand in recent years, coal is projected to overtake natural gas by 2030 to become the largest source of power in Southeast Asia.

Defense & Security

Russia wants to barter Sukhoi for Indonesian rubber The Jakarta Post 16th May 2017
The Russian government has expressed interest to exchanging its Sukhoi jet fighters for natural rubber from Indonesia, Foreign Ministry foreign trade director general Oke Nurwan said.

Russia offers turnkey nuclear plants to Indonesia: Luhut The Jakarta Post 9th May 2017
Russian Rosatom State Atomic Energy Corporation has offered to develop turnkey nuclear power plants in Indonesia, said Coordinating Maritime Affairs Minister Luhut Pandjaitan on Thursday. The firm has offered to develop nuclear power plants in regions where there is no threat of earthquake, such as Bangka in Sumatra and East Kalimantan, Luhut said.

Energy

Oil and gas losing ground to renewables The Jakarta Post 18th May 2017
Oil and gas may have been king of the jungle for decades, but investors are being reminded of the increased competition from renewable energy sources as the government emphasizes the need for efficiency in the upstream sector.

Six gas sale and purchase agreements signed The Jakarta Post 17th May 2017
Six gas sale and purchase agreements were signed during the opening of the 41st Indonesian Petroleum Association (IPA) exhibition and convention at the Jakarta Convention Center in South Jakarta on Wednesday.

Govt issues regulation on flare gas The Jakarta Post 14th May 2017
The Energy and Mineral Resources Ministry has issued a ministerial decree regulating the sale of flare gas to reduce flaring activities, while also cutting down on greenhouse gasses.

Indonesia forces new oil and gas contractors to reimburse earlier investment Platts 10th May 2017
Indonesia's government is set to force new oil and gas contractors to reimburse unrecovered investments made by previous contractors to reduce production declines, as producers have tended to cut spending towards the end of their contracts, according to senior officials. The move is part of concerted government efforts to increase oil and gas output and ramp up exploration and development activity in the country, which is faced with growing domestic consumption and natural decline at aging fields.

5,000 MW mine-mouth plants to be offered at auction The Jakarta Post 10th May 2017
State-owned electricity firm PLN plans to hold an auction for mine-mouth coal-fired power plants in Sumatra and Kalimantan with a total capacity of around 5,000 megawatts (MW) of electricity in the near future. “For Sumatra, the total capacity is around 3,500 MW, while the capacity for the ones in Kalimantan might reach 1,500 MW. Those mine-mouth plants will be offered through auction this year,” PLN procurement director Supangkat Iwan Santoso said in Jakarta recently.

Arcandra to meet lenders to develop new, renewable energy Antara News 10th May 2017
Vice Minister of Energy and Mineral Resources Arcandra Tahar is set to hold talks with some lenders to develop new and renewable energy in Indonesia. "I feel ashamed that they (lenders) said they have a lot of funds but none of us has come to them to establish partnership. I will try to have the interest rate set at less than 6 percent," Arcandra said here on Tuesday.

Arcandra defends gross split in oil production sharing system Antara News 8th May 2017
Deputy Minister of Energy and Mineral Resources (ESDM) Arcandra Tahar defended the new system of gross split in oil production sharing saying it is more efficient in cost and time. "There was a study saying that the gross split scheme is less attractive and interesting. I want to know what variables were included in the calculation. Is time included?" Arcandra queried in seeking to socialize the gross split scheme here on Monday.

Minister Jonan inaugurates gas network in Surabaya Antara News 8th May 2017
Energy and Mineral Resources Minister Ignasius Jonan inaugurated a gas network which connects 24 thousand household consumers in East Java. "Household consumers using gas network connections can save on Rp20 thousand per month," Minister Jonan said when inaugurating the gas network for household consumers at the Penjaringan Sari flat, Rungkut, here on Sunday.

PLN eyes turning to nuclear if renewable energy goal fails Asian Power 15th May 2017
The country's RUPTL states that nuke is still their last resort. The Jakarta Post reported that state electricity company PT PLN has revived Indonesia’s long held ambition to operate nuclear power plants after it officially floated the idea for the first time in its new business plan, which will guide the company’s operation until 2026. PLN’s so-called business electricity procurement plan (RUPTL), officially endorsed by the Energy and Mineral Resources Ministry last month, also opened up the possibility of installing nuclear plants in remote regions, as an alternative to highcost renewable energy sources. While the RUPTL maintains that nuclear energy remains a last resort for electricity procurement, it notes that the energy source must be considered if renewable sources from water, wind, geothermal, solar and biomass fail to meet the desired target.

Financial Services

Banking information access regulation sent to House The Jakarta Post 18th May 2017
The government has sent regulation in lieu of law (Perppu) No. 1/2017 on financial information access for taxation purposes to the House of Representatives to be looked at by lawmakers and representatives of the government.

Government issues regulation to end bank secrecy The Jakarta Post 17th May 2017
The Indonesian government on Tuesday issued a regulation in lieu of law (Perppu) to end bank secrecy in the country, with officials of tax offices allowed to directly access bank accounts owned by both Indonesian citizens and foreigners.

Gov't Gives Tax Office Access to Accounts at Financial Institutions Jakarta Globe 17th May 2017
President Joko "Jokowi" Widodo has signed a regulation to give tax authorities access to information on accounts held at financial institutions, including banks, a tax office spokesman said on Tuesday (16/05).

Indonesia gives tax office access to account information at financial institutions - official Reuters 16th May 2017
May 16 Indonesia's President Joko Widodo has signed an emergency government regulation that gives the tax authority access to account information held by financial institutions, including banks, the tax office spokesman told Reuters.

BI Projects May Inflation at 0.27% Tempo 15th May 2017
Bank Indonesia (BI) projects May's inflation at 0.27 percent. This is based on a survey BI held in 82 cities in the second week of the month. On an annual basis, May's inflation is estimated at 4.12 percent. "This is still in line with the government's and BI's target," BI governor Agus Martowardojo said last week.

Indonesia sets a cap on how much foreign cash can be carried in Reuters 15th May 2017
Under a Bank Indonesia (BI) regulation dated May 5 and effective from March 5, 2018, no one except banks and licensed money changers will be allowed to bring in banknotes equivalent to 1 billion rupiah (£58,137).

Food & Agriculture

Government certifies only 1 million plots of land as of May The Jakarta Post 16th May 2017
Agrarian and Spatial Planning Minister Sofyan Djalil said his ministry could only certify around 1 million plots of land as of May from the total target of 5 million certificates by the end of this year.

Agricultural infrastructure development to continue: President Antara News 9th May 2017
President Joko Widodo (Jokowi) gave an assurance here on Saturday that the development of agricultural infrastructure, such as dams, reservoirs, secondary, and tertiary irrigation networks in the country, would continue to assure water supply for farming.

Govt to control garlic imports following price increase The Jakarta Post 9th May 2017
Trade Minister Enggartiasto Lukita has said that he will issue a decree to regulate garlic imports and distribution to prevent price fluctuations of the commodity, following a sharp prices increase. The minister said he did not know the cause of the price increase from around Rp 30,000 (US$2.25) per kilogram to above Rp 50,000, but he estimated that it was because of an absence of government control. “There is no government regulation on garlic imports. Without government intervention, the price could rise any time,” Enggartiasto said on Monday after attending a meeting with garlic importers.

Indonesia targets to stop corn import this year The Jakarta Post 8th May 2017
President Joko “Jokowi” Widodo has said his government aims to prohibit corn imports this year in an attempt to encourage farmers to increase their production. Through the government policy Indonesia could reduce its corn imports to only 900,000 tons, down from 3.6 million tons in the previous year.

Health & Life Sciences

Sandiaga Calls on Jakartans to Fight against Tobacco Industry Tempo 15th May 2017
Jakarta Deputy Governor-elect Sandiaga Uno has called on Jakartans to fight against the tobacco industry. He also urges the people to unite following the end of Jakarta gubernatorial election.

Indonesia ministry seeks to extend forest moratorium by two years The Edge Markets 10th May 2017
Indonesia's environment and forestry ministry wants to extend a moratorium on issuing new licences to use primary forest and peatland in the Southeast Asian country by two years, an official said on Wednesday. The moratorium was established under the previous administration of President Susilo Bambang Yudhoyono in a bid to reduce gas emissions linked to fires caused by deforestation, with peatlands particularly vulnerable. The ministry requested the presidential office approve the extension of the moratorium, which is due to expire on May 20, said Yuyu Rahayu, acting director general of forestry at the ministry.

ICT

Minister Says Internet Data Plans Must be Affordable, Sustainable Tempo 16th May 2017
Communication and Informatics Minister Rudiantara says that the factors of affordability of the consumer and the sustainability of the operator for the internet data tariff plan must be balanced. He issued the statement because the government must maintain the condition of consumers and the industry.

Indonesia prone to cyberattacks: Expert The Jakarta Post 16th May 2017
Indonesia Cyber Security Forum (ICSF) chairman and cofounder Ardi Sutedja has warned that Indonesia is vulnerable to cyberattacks, since the country still faces a lack of cybersecurity experts.

Government chooses Mimika to be one of Indonesia`s smart cities Antara News 12th May 2017
The Communications and Informatics Ministry has picked Mimika of Papua, to be included among 25 regencies in the country to build a smart city in 2017. A smart city is an urban development vision to integrate information and communication technology and Internet of things technology in a secure fashion to manage a citys assets.

Infrastructure

Terminal 3 ready to fully serve Skyteam members in June The Jakarta Post 16th May 2017
Terminal 3 of the Soerkarno-Hatta International Airport is ready to fully serve members of Skyteam, an airline alliance comprising 20 carriers worldwide, in June, state-owned airport operator PT Angkasa Pura (AP) II president director Muhammad Awaluddin has said.

Indonesia, China consortium sign $4.5 bln loan for rail project NASDAQ 15th May 2017
A consortium of Indonesian and Chinese companies building Indonesia's first high-speed railway has signed a $4.5 billion loan with China Development Bank, Indonesia's government said on Monday.

Minister plans to open Maluku-Darwin shipment line The Jakarta Post 8th May 2017
Transportation Minister Budi Karya said his ministry plans to open a shipment line from Maluku to Darwin in an attempt to boost the fisheries industry in the region. “There are many fish that physically cannot stay fresh too long,” said Budi in a statement on Sunday, adding that currently ships had to pass through Surabaya on their way to the Australia city.

President Jokowi to inaugurate three projects in Jayapura Antara News 8th May 2017
Indonesian President Joko Widodo (Jokowi), as part of his work visit to Papua on May 9-10, is scheduled to inaugurate three projects in Jayapura. The three projects to be inaugurated are the Skouw Border Post, Holtekam Steam Power Plant, and Mama-Mama Market in Percetakan Street, Jayapura.

Manufacturing

Car manufacturers eye higher exports The Jakarta Post 16th May 2017
Carmakers are eyeing higher exports this year as they set their sights on Southeast Asian and Middle Eastern markets. Major car manufacturer PT Toyota Motor Manufacturing Indonesia, for instance, targets a 10 percent increase in exports to 169,000 units this year, after having exported 49,300 units in the first quarter.

Growth of manufacturing industry falls short of expectation: BI Antara News 8th May 2017
The growth of the Indonesian manufacturing industry, which reached 4.21 percent year-on-year (y-o-y) in the first quarter of 2017, fell short of expectation, Bank Indonesia (BI) Senior Deputy Governor Mirza Adityaswara said.

Thailand

Thailand's PTTEP suspends Indonesia investment over oil spill case Reuters 9th May 2017
PTT Exploration and Production PCL said on Tuesday it was suspending investment in Indonesia after the Indonesian government filed a $2 billion lawsuit against the Thai state-owned energy firm for alleged damage from an oil spill eight years ago. PTTEP executives, however, said Indonesia remained a strategic priority as it seeks to invest up to $4 billion in expanding its energy field holdings with a focus on Southeast Asia.