(The author is a Reuters Breakingviews columnist. The opinions
expressed are her own.)
By Una Galani
HONG KONG Oct 3 (Reuters Breakingviews) - Tax amnesties are
a tricky business. Indians have declared $10 billion of assets
in a four-month long scheme to widen the tax base. A high
penalty means New Delhi will pocket almost as much revenue as
Indonesia, where locals have just declared about $250 billion in
three months. In the long term, using more carrot and less stick
is probably more valuable to a nation's finances.
India set a penalty at a whopping 45 percent. So the scheme
will net more than $4.5 billion in a country where just 1
percent of people pay tax at the last count. India has
previously offered lower penalties, though not in a significant
way since 1997. By contrast, Indonesia charged as little as 2
percent - meaning Jakarta will bag just $7.5 billion.
Both countries will welcome the one-off boost to strained
public finances. The long-term benefits, though, stack up better
for Indonesia. India's punitive charges probably means a lot of
undeclared money remains stuffed under mattresses or converted
into gold bars.
In contrast, Jakarta is effectively giving rich tax dodgers
a free pass - something that has prompted protests. But it
learns a lot more about where money is stashed at home and
overseas. If that information is used wisely, Indonesia is
better placed to permanently widen the meagre tax base.
On Twitter twitter.com/ugalani
- Indians have declared cash and other assets worth 652.5
billion rupees ($9.8 billion) in a tax amnesty, the income tax
department said on Oct.1.
- The department said that the final figure would probably
be revised upwards as authorities count the remaining filings in
the four-month-long "Income Declaration Scheme", which closed on
- Cash and assets declared under the scheme are subject to a
penalty of 45 percent after factoring in taxes and surcharges.
- For previous columns by the author, Reuters customers can
- SIGN UP FOR BREAKINGVIEWS EMAIL ALERTS:
(Editing by Quentin Webb and Katrina Hamlin)