A lobby group schemes to channel offshore money into venture funds

Photo credit: Pixabay.

Indonesia’s venture capital funds could see an influx of money before the year ends – if, that is, a freshly-minted venture capital alliance and Indonesia’s financial services authority (OJK) successfully lobby the government to that effect.

Their idea is to channel money returning to Indonesia as part of an upcoming tax amnesty program into startup venture funds.

Sunset policy

For context: Indonesia is about to pass a law that asks corporate and individual taxpayers to come clean about previously unreported assets – including those hidden offshore.

Having offshore assets isn’t illegal, as long as they’re declared and taxed properly.

In return, it won’t charge the outstanding payments and penalties that would have piled up in the time those assets went untaxed. This program carries a picturesque name: sunset policy.

Having offshore assets isn’t illegal, as long as they’re declared and taxed properly under Indonesian law (PDF link).

But, it seems, not everyone’s been diligently declaring how much they own, and where.

Indonesia Corruption Watch says the country has been losing billions of dollars due to tax evasion yearly. In 2008, for example, the amount was pegged at US$10 billion.

Documents that surfaced as part of the Offshore Leaks and Panama Papers leak provided investigators with plenty of clues.

Singapore is the tax haven of choice for Indonesians. The government estimates some US$225 billion belonging to Indonesian citizens to be stashed there, outside of its reach.

But tax haven countries like Singapore are facing increasing pressure to put an end to these practices, and it’s all boiling down to a 2018 deadline. In 2014, Singapore was one of 47 countries that committed to start sharing information with foreign tax authorities, and this will go into effect in two years.

For Indonesians with undeclared money in Singapore, this means two things: either come clean about it now and face no consequences thanks to the sunset policy, or risk being exposed in 2018 through the information sharing agreement.

Experts believe many will choose route one, and that the amnesty could bring US$153 billion back into the country soon.

Redirect to venture funds