Indonesia: We can damage Singapore wealth industry, with help of our Chinese tycoons 
Jul 26 2016, 08:17 AM, updated 10y ago
The 1998 Jakarta riots and attacks against ethnic Chinese caused a massive outflow of capital from Indonesia
The Indonesian government last week launched a tax amnesty programme which allows all past evasion sins to be forgiven upon the payment of up to 5% tax on the money. The new law seeks to entice rich Indonesian taxpayers with undeclared or under-reported wealth or assets, both in the country and outside, to declare them voluntarily, in exchange for non-prosecution and major discount rates as incentives. It also encourages those with funds deposited overseas to repatriate and invest them in local bonds and schemes.
Indonesian tycoons fled with so much money that it amounted to US$200 billion today, parked in Singapore
Indonesian Finance Minister Bambang Brodjonegoro issued a directive to outline specific guidelines for fund repatriation and reinvestment that the new programme is expected to produce. The minister alleged that too much money owned by Indonesia's rich are currently parked "in a specific country", which is apparent that he was referring to Singapore. The directive is easy. Indonesia would forgive any tax evasion crimes committed in the past, as long as the tycoons declared the money and pay 5% tax on it. Once done, the Indonesian law will treat that money as 'legal'.
For years, Indonesia has claimed those money was gotten through illegitimate means during Suharto regime
"This will have an impact and some Indonesian money will flow out of Singapore, but still a lot of money will remain offshore," said a Singapore-based senior private banker, who asked not to be identified because of the sensitivity of the topic. "I have not seen tax amnesties work exceptionally well in other centers so it is unclear how effective this one will be." The Indonesian stock market had expected the successful implementation of the bill since its passage through parliament with the main stock index JKSE up 5% and foreign investors net buying around 10 trillion rupiah (US$763.65 million) since then.
But now Indonesia is basically saying it would recognize those money as 'legal' as long as tycoons willing to pay a 5% tax on them
Any repatriated funds, since they would be considered legal then, will be allowed to be invested in instruments like government issued securities, stocks, bonds and mutual funds issued by private companies, as well as the direct purchase of properties. That would be appealing to the tycoons as Indonesia is a booming economy with 240 million people. Already, there are worries that this might lead to an outflow of assets from Singapore's massive wealth management industry.
There are too many ultra-rich Indonesian Chinese tycoons living in Singapore and storing their money there
Among the 50 richest people in Indonesia, 40 are of ethnic Chinese descent, and many reside in Singapore. Singaporean consultants, lawyers and bankers closely involved with the industry expect roughly US$30 billion to go to Indonesia under the amnesty. After the passing of the law, Mr Brodjonegoro, the Finance Minister, went hostile against Singapore, even hinted that Singapore, fearing a massive capital flight, had been attempting to lobby the Parliament to block the Bill.
After law passed, conspiracy theories surfaced that Singapore is working to thwart Indonesia's plan. Indonesian finance minister says he is not afraid of 'small' Singapore
The Indonesian finance minister went further by professing to believe in the theory that Singapore is somehow conspiring against the new law. "Let them do their worst. I am not afraid of Singapore; it's merely a tiny country," he reportedly told a parliamentary committee. Other politicians have also attacked Singapore by accusing Singaporean banks of imposing hurdles with a special scheme to leave their assets in the city state instead of repatriating them.
Vice President Jusuf Kalla: Singapore is worried now because most of the money parked there are Indonesian money
"Every country wants to survive," Vice-President Jusuf Kalla told reporters. "It (only) proves what people always say that most of the money stashed in Singapore comes from Indonesia." Indonesian House of Representatives Speaker Ade Komarudin urged the Singapore Government not to thwart the tax amnesty programme. "I want to remind Singapore to put away the policy and I hope that (news about the incentive by banks) are not true, because it will very much obstruct the success of the Tax Amnesty Law," he said. "We've been friends for a long-time, don't ruin it for your ego", he added.
The amnesty bill is Jokowi's attempt to reassure a group that dominate 70% of Indonesia's private economy
Mr Yustinus Prastowo, the executive director of Centre for Indonesia Taxation Analysis, told the Jakarta Globe he had heard about the offer first-hand from Indonesian businesspeople who have been approached personally by private agents. "This type of incentive is legal by law and the Indonesian government must be ready to face it. The money, regardless of its source, will become legal under the scheme," Mr Prastowo said.
Jakarta has taken great steps to reconcile with its Chinese population since the 1998 tragedies
Singapore refuted the conspiracy theories. "The government of Singapore has denied allegations that several unnamed Singaporean banks have lured Indonesian customers to maintain their assets in the country," Singapore's Ministry of Finance and Monetary Authority of Singapore said in a statement. "Recent claims in the Indonesian media that Singapore is implementing policies to 'thwart' Indonesia's tax amnesty program are untrue," it said. Authorities also claimed that Singapore has not reduced tax rates or amended any of their policies in response to Indonesia's tax amnesty program.
Singapore: We don't live in fear of anyone. We are small but we are successful
In regards to the Indonesian finance minister's statement, Singapore's Law and Home Affairs Minister K Shanmugam said he does not understand why there is "this constant attempt to put us down; and taunting us that we are small." Mr Shanmugam wrote that Singapore is good friends with Indonesia in the last 50 years. Both countries have cooperated on many matters, and both countries benefit from these good relations. "But every now and then, someone in Indonesia will tell us that we should know our place, a little red dot," he said. "Yes, we are a little red dot. We may be small. But we are respected and successful. And our people lead meaningful lives. And we don't live in fear of anyone else," he added.
http://www.reuters.com/article/us-indonesi...SKCN0ZY098?il=0
http://www.todayonline.com/world/asia/indo...s-stashed-spore
http://www.bloomberg.com/news/articles/201...-lure-investors
http://jakartaglobe.beritasatu.com/busines...mnesty-program/
http://fortune.com/2016/07/25/indonesias-t...w-in-singapore/
http://www.channelnewsasia.com/news/asiapa...es/2981094.html
This post has been edited by hippihippo: Jul 26 2016, 08:34 AM
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