For broadcast April 18, 2016 and thereafter.

President Joko Widodo is scheduled to visit several countries in Europe, namely Germany, Britain, Belgium and the Netherlands on April 17-23, 2016. The visit of the President aims to attract more investment from the European continent. The President’s visit to the Blue Continent this time was carried out in close proximity to the uncovering of the Panama Papers scandal involving thousands of people ranging from government officials, businessmen, and corporations from various countries in the world suspected of carrying out practices of tax avoidance, corruption, money laundering, and financing of terrorism in a heavenly country tax (tax haven).

The Panama Papers are a momentum for the global public to urge tax haven countries to end the regime of secrecy. This visit is an opportunity for Indonesia to re-discuss international tax cooperation in the G20 scheme considering the four countries visited by President Jokowi are G20 member countries. The President can also use the agenda of this visit to conduct a preliminary meeting before the G20 Summit in September.

“President Jokowi needs to urge the G20 countries to agree on a sanction mechanism, both economic and political sanctions, for countries that are tax havens. This is to ensure that the exchange of information through the Automatic Exchange of Information (AEoI) can be carried out effectively, “said Ah Maftuchan, Executive Director of the Prakarsa Association.

In addition, this visit can also be used to re-encourage the formation of the International Taxation Agency under the United Nations (UN). The formation of the International Taxation Agency is important to ensure the involvement of poor and developing countries that have been marginalized so that they can help determine the Global Tax System.

“The proposal for the formation of a Taxation Agency under the United Nations was submitted by the G-77 countries at the UN Third Conference on Financing for Development in Addis Ababa in 2015. But at that time developed countries, especially Britain, rejected the proposal. The President’s trip to Europe should be utilized to reopen talks on this matter so as to encourage changes in international taxation governance that have been biased in the interests of developed countries, “said Siti Khoirun Ni’mah, INFID Program Manager.

The proposal for the establishment of an International Taxation Agency must be able to address the injustices of developing countries that have been victims of developed countries in terms of taxation. “The bias of the international taxation system can be seen from the corporation’s obligation to pay corporate taxes that are not based on the location where the corporation operates and profits, but rather based on the location where the corporation is registered. This encourages the flourishing of tax havens which allows corporations to exploit resources in developing countries and register ownership in tax haven countries to avoid paying taxes. It also gave rise to a safe haven country that allowed corrupt companies and politicians in developing countries to have assets, enjoy a luxurious lifestyle, and a clean reputation, “said Dadang Trisasongko, Secretary General of Transparency International Indonesia. The practice of tax havens and safe havens can damage developing countries’ trust in developed countries. Therefore, the tax haven and safe haven state secrecy regime must end immediately.

In addition, President Jokowi is also expected to use the momentum of the trip to Europe this time to represent the voice of developing countries and discuss the importance of transparency in beneficial ownership in international forums. “Transparency International’s (2015) report on the BO transparency legal framework shows that not all G20 members adhere to the ten BO Transparency principles. Only four countries have legal frameworks that are categorized as good and very good to support the implementation of BO Transparency, namely the UK, Argentina, France and Italy, “Dadang Trisasongko added.

Moreover, Indonesia and the UK are also active in one of the G20 Working Groups on anti-corruption (ACWG), where BO transparency can be emphasized more. “Beneficial Ownership Transparency is one way to open and trace the actual ownership of companies in the world, so that the avoidance and tax evasion practices can be avoided. For example, BO provisions have begun to be required in the extractive sector (oil and gas and mining) through the new EITI (Extractive Industries Transparency Initiative) standard, which has just been set this year in Peru. Indonesia has also become one of the countries implementing the EITI standard, “added Maryati Abdullah, Coordinator of Publish What You Pay Indonesia.

At present, fair and transparent taxation management is a demand of a global community that can no longer be dammed. For this reason, the commitment of the heads of state is crucial, not only concerning global economic diplomacy, but also related to financing the domestic development agenda in each country, including Indonesia. The information exchange regime that will begin in 2017 not only brings a bright spot for tax haven and safe haven openness, but also provides guarantees for developing countries to be able to meet development sources from domestic sources that have been hidden abroad.

Global efforts to encourage tax and financial openness should be addressed wisely by the Indonesian government. Domestically, fair and transparent tax management can begin by delaying the discussion agenda of the Tax Amnesty Bill. Because, in addition to injuring a sense of public justice, elitist in nature and minimal participation, the Tax Amnesty Bill is also still very raw and its effectiveness is doubtful. “The target of state revenue from tax amnesty is only Rp 60 trillion, lower than the tax receivable figure. Instead of implementing tax amnesty and giving more tax incentives to corporations and super rich people, it is better for the government to optimize tax collection efforts, “said Ah. Maftuchan, Coordinator of the Fair Tax Forum.

For this reason, the Fair Tax Forum, which consists of observers and NGOs in the tax, finance, governance, anti-corruption, gender equality and global development sectors, asks the government to strengthen its commitment to tax and financial openness in international forums, and stop efforts to weaken enforcement taxation law by delaying the discussion of the Tax Amnesty Bill.

Fair Tax Forum:
Association of PRAKARSA, ASPPUK, ICW (Indonesia Corruption Watch), IGJ (Indonesia for Global Justice), IHCS (Indonesian Human Rights Committee for Social Justice), ILR (Indonesian Legal Roundtable), PWYP Indonesia, YLKI (Indonesian Consumers Foundation), INFID (International NGO Forum on Indonesian Development), TII (Transparency International Indonesia)

Contact Person:
PRAKARSA Association: Ah. Maftuchan (amaftuchan@theprakarsa.org)
Transparency International Indonesia: Dadang Trisasongko (dtrisasongko@ti.or.id)
Publish What You Pay Indonesia: Maryati Abdullah (maryati.mrt@gmail.com)
INFID: Khoirun Nikmah (nikmah@infid.org)