Indonesians line up to beat deadline for tax amnesty's best terms

By Gayatri Suroyo and Hidayat Setiaji

JAKARTA (Reuters) - Thousands of Indonesians queued for hours on Friday to get the most attractive terms on offer under a tax amnesty that's recovered strongly after a slow start and which the finance minister calls the most successful a country has had.

The amnesty, which runs until March, aims to provide the government with billions of dollars in revenue to help cover a large fiscal deficit.

Facing government threats of an unprecedented crackdown on tax evaders, nearly 330,000 Indonesians have joined the tax amnesty scheme and declared $250 billion of assets since its launch in July.

Friday marks the end of the program's first phase, during which the lowest penalty of 2 percent on previously unreported assets applies. The penalty rates rise 1-2 percentage points on Saturday and rise again from Jan. 1 for the final phase.

"I don't want to miss this. If the value of what I declare is big, than 1 percentage point matters," Lenna Yovanca, an employee in the fashion industry, said while waiting with scores of others outside the main tax office in Jakarta.

As of Friday afternoon, 328,611 taxpayers had signed up, declaring 3,441 trillion rupiah ($263.74 billion) with 134 trillion rupiah pledged to be repatriated back to Indonesia, according to a government website giving updates.

Indonesians who declare assets overseas are not required to bring them home, but pay a lower penalty rate if they do. The bulk of Indonesia's offshore assets are believed to be in Singapore, with an estimated $200 billion there in private banking assets.

To date, the amnesty has generated 97 trillion rupiah in government revenue, or nearly 60 percent of Jakarta's 165 trillion rupiah target.

A STRONG SEPTEMBER

In the past few days, people wanting to join the amnesty started lining up outside tax offices at 3 am, officials said. Some of Indonesia's wealthiest individuals have also signed up. Tax offices have stayed open until midnight.

"There has been rapid development this month," Finance Minister Sri Mulyani Indrawati told reporters on Thursday.

The former World Bank managing director said a parliament hearing that while many countries have done tax amnesties, Indonesia "is at the highest position" among them with revenue collection equivalent to 0.65 percent of gross domestic product.

India received revenue representing 0.58 percent of GDP, Chile 0.62 percent, Italy 0.2 percent and South Africa 0.17 percent, Indrawati said.

Wellian Wiranto, OCBC economist, wrote that the success of the amnesty "marks the start of a silent paradigm shift that would change Indonesia's political economy dynamic for the better".

Wiranto noted that Indonesians who join the amnesty will "learn to demand a say in how their money is spent by the government" after they commit to paying taxes on their income.

To encourage more amnesty participation, the government is letting participants declare their assets and pay a penalty by Friday, but submit paperwork by Dec. 31.

Not everyone has been happy about the amnesty. A lawsuit challenging it as forgiving past crimes of rich taxpayers has been filed in the Constitutional Court, which will rule at a later date.

On Thursday, thousands of workers protested peacefully against the amnesty in Jakarta.

(Writing by Randy Fabi; Editing by Richard Borsuk)

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