Indonesia is pushing for an amnesty regime to encourage more of its citizens to declare offshore funds, joining a number of other countries that have taken this course.

A new tax amnesty proposal of the Indonesian government puts the Southeast Asian state alongside jurisdictions such as Italy and Brazil in seeking to repatriate much-needed revenues, Reuters has reported. 

Legislation being submitted to Indonesian lawmakers proposes a system whereby persons who disclose assets in the first month of the amnesty will be taxed at just 1 per cent, the news service quoted Luhut Pandjaitan, President Joko Widodo's chief legal minister, as saying. Previously, the government said that taxpayers disclosing their wealth in the first three months would be taxed at 2 per cent, rising to 4 per cent in the following three months and up to 6 per cent by the end of 2016, when the programme ends. That compares with the top tax rate for individual income of 30 per cent and the corporate rate of 25 per cent.

Parliament will begin debating the draft law in coming weeks, the report said.

As reported by this publication, jurisdictions such as Italy, the UK, Liechtenstein and Brazil, among others, have run disclosure and amnesty programmes in recent years to recover revenues stashed away in undeclared accounts in offshore centres. Separately, the US and Switzerland in 2013 signed a pact under which scores of Swiss-based institutions have signed non-prosecution agreements and paid fines to draw a line under wrangles over undisclosed money. More than $1 billion of fines were paid under that programme.

The report on Indonesia, noting that the country's wealth management industry is small (only about $20 billion in assets under management compared with $1.8 trillion in Singapore), says it has potential to grow if a significant amount of offshore wealth returns home.

Lawyers have told this publication in recent years that Indonesian-sourced wealth is an important revenue earner for Singapore private banks because individuals have traditionally been so distrustful of Indonesian authorities – and fearful for their financial privacy – they have preferred to take the risk of putting money offshore. Such fears may deter some persons from declaring offshore assets.

Indonesia will be applying the Common Reporting Standard, a global system of disclosure of accounts and data transfer, from 2018.

Under the government of Indonesian President Widodo, however, there has been a noted attempt to shift perceptions of the country, pushing back against protectionism and encouraging more inward investment into the vast country.

Yesterday, the government set out "big bang" liberalisation measures on foreign investment in nearly 50 sectors. The move comes at a time when there are concerns that decelerating growth in China, and unsettled global markets, could dampen future growth.