Few people enjoy paying taxes, as millions of Americans can attest to this time of year. Indeed the recently linked “Panama Papers” show how far some political and business elite will go to hide their assets from the prying eyes of finance officials. In Indonesia, tax authorities are about to gain a new weapon against those who under-report their incomes on their tax returns: credit card data.
Starting at the end of May, Indonesia’s finance ministry is forcing 23 banks to share their customers’ credit card transactions on a monthly basis. Among the banks are not only the nation’s largest lenders, including Bank Central Asia and Bank Mandiri, but also branches of foreign banks, including Citibank, Standard Chartered, and HSBC.
Under Regulation No. 39/2016, tax authorities will have access to account numbers, merchant IDs, merchant names, card owner names, addresses, citizen identification or passport numbers, tax identification numbers, invoices, transaction details, and customer credit limits.
The idea is that tax officers will be able to cross-check credit card owners’ spending against their reported income. As it has for years, Indonesia faces a sizable revenue shortfall, exacerbated by slumping exports and weak consumption and company profits. That threatens to hinder its ability to fund much-needed infrastructure projects.
The nation’s tax office relies on taxpayers to file annual returns on their own, and it often lacks sufficient secondary data to verify what gets reported in those returns—assuming returns get filed in the first place. Indonesia has about 27 million registered individual taxpayers, when based on its population it should have 120 million. And of those, last year only 9.8 million filed returns.
Some Indonesians will no doubt look to skirt the new rules.
“If customers want their transactions to be untraced, then don’t use credit cards,” advised a representative of the Indonesian Consumers Organization.
Another solution would be to “apply for credit cards to foreign banks outside of Indonesia, maybe to Singapore,” said Jahja Setiaatmadja, president-director of Bank Central Asia, one of the domestic institutions affected by the new regulation. “All credit cards can be used anywhere anyway.”