Monday, 14 April 2014


The discourse to make way for tax authorities to open bank’s secrecy in the effort to find access to customer’s data once again surfaced as hot issue. It was Deputy Minister Bambang PS Brojonegoro who again uplifted the issue. The reason was that many bank customers were paying amount of taxes not in accordance with their total deposit in banks.

The discourse had been an interesting issue. So far to access customers data in banks was an abominable act, customer’s data in banks was regarded as something sacred and untouchable. The reasons were varied. For example, if a bank broke the rule, customers would draw out their money is vast amount as banks would no longer regarded as safe haven to keep money.

The Law on banking justify protection of customer’s privacy by banks. But until when would we let such to happen? The Directorate General of Tax Fu’ ad Rahmany stated that secret keeping by banks was getting out of date. According to Fu ad, in some countries there was no more bank secrecy for tax authorities.

Switzerland, Singapore, Liechtenstein, Bahama, Cyprus, Luxemburg, Monacco, San Marino, and Seychelles were countries known as tax haven. Rumors had it that possessors of big capital deposited their money in these banks especially money possessed by fraudulence. The Government and monetary authorities in those countries prohibited banks and their employees to leak out customers data. Once the rule was broken, the punishment would be severe.

Thankfully secrecy of banks were gradually eliminated. Switzerland, for example, since February 1, 2013 had totally eliminated the rule of bank secrecy. Swiss new Law had made it mandatory for banks to inform the monetary authority if there was any account holder who avoided tax or manipulated tax in their countries.

Before Switzerland, Liechtenstein had already moved earlier. Today this country was no longer tax haven, but safe haven. In the past, many customers took a lot of money to other countries. However, the banking system had been changed since 2008. Other countries who were being save haven would take the same step.

Word was out that Singapore would soon follow the steps of Swiss and Liechtenstein. They be­gan to realize that many black billionaires kept their money in their countries with well kept secret. At the G-20 Summit meeting in London, in April 2009, they agreed to put an end to bank secrecy. While making a breakthrough in bank secrecy system, G-20 countries also agreed to eliminate tax free condition for money keepers in member countries.

The decision was made by G-20 countries when they were aware that many rich citizens were avoiding tax by keeping their money in accounts kept as secret by banks. The secrecy system was ben­efited by white-collar criminals. G-20 was a group of 20 advanced and developing countries in which In­donesia was included; the objective was to dissect world's economic issues.

Sometime ago, the Directorate General of Tax and the Financial Service Authority had Sign MoU to harmonize law and regulations. It was reported that by this agreement, soon tax officials could access in­formation of the banking sector, capital market, in­surance, pension plan and other financial institutions under OJK. From that information, tax officials could find out whether tax subjects had paid their obliga­tions or not, including transactions hidden by them so far.

In short, by this opening of access to infor­mation in the financial service sector, there would be no more loophole for tax subjects to avoid their obli­gations. The way it had been, the Directorate Gen­eral of Tax of the Ministry of Finance could ask BI to open customer's data of bank customers suspected as having tax problem, but the Directorate General of Tax had no authority to open secret data.

For information, taxation potentials in banks and managed fund in non-bank financial institutions were enormously big. Today in the banking sector third-party fund had come to Rp3,294.7 trillion. Of that amount around 43% were owned by 63,8816 customers who on the average deposited fund more than Rp5 billion.

The same was with Small-and-Medium Busi­ness I.UKM1, turnover in this sector was estimated to constitute 30% of GDP. In APBNB-P state bud­get 2013, Indonesia's nominal GDP was estimated at Rp9,270 trillion, so high UKM income had high tax potentials.

Many circles believed that through the MoU between the Dir. Gen of Tax and OJK, this high tax potential could be pursued. Moreover to consider that control over the banking sector and Bappepam-LK was already under OJK. So the Dir. Gen. of Tax, Min­istry of Finance expected the case of bank secrecy would find its way to solution whereby they could support The Dir. Gen. of Tax in tax hunting which would eventually increase state's income.

The Director General of Tax was optimistic their step would be supported by OJK. The reason was if in other countries bank's data could be ex­posed for the Tax Department as world's benchmark, in the USA, France, Europe, England, or even the Netherlands tax officials were permitted to peep into customers account for the interest of taxation.

Previously it was disclosed that the unexplored tax potential resources from personal accounts came to Rp150 trillion per year. The open bank account could help tax officials to pursue the potentials. There were 40 million citizens who could afford to pay taxes but were not paying it. The Tax Dept found it hard to chase this potential as the national data system was not sound while the only valid data was customers ac­count in banks but it was bank's secrecy which posed as obstacles.

Law no. 10 1998 on banking mentioned that every bank had the obligation to keep all matters re­lated to customers' account a secret. Exception was also applicable for examination, billing of investiga­tion purposes.

Today the Law was in the process of amend­ments at Parliament. The Dir. Gen. of Tax wished that the access was widened for the purpose of control and exploration of tax potentials. The Dir. Gen. of Tax had report from BI there were 180,000 deposit accounts each worth above Rp2 billion. Customers should be examined to check whether they had paid their duties or not.

To have the authority to access personal ac­counts, the Dir. Gen. of tax still had to wait for Parlia­ment's approval. So far House was still dissecting the amendment of the Law of Banking which regulated access to customer's account. The obstacle was that according to the Law of banking, each bank had the obligation to keep as secret all matters related to depositor's account.

Exceptions was only applicable for examina­tion, invoicing, or investigation. So it was impossible to open data automatically unless the Law of banking was amended. If the Dir. Gen of Tax wished to know customer's data exempted in the Law of Banking, banks would give the needed data.

The Parliament had the same opinion to re­fuse the proposition that Tax officials had the author­ity to disclose data of all bank customers - because it might threaten business of the banking industry. Politicians in House feared that it would trigger big cli­ents to transfer their asset to overseas banks where secrecy was well protected.

Therefore they proposed that if the Dir. Gen of Tax were given the authority, they could not auto­matically disclose customer's financial data, unless there was indication there had been tax manipula­tion by any person or body. The procedure must be tight, i.e. the related tax investigator must keep as secret all customer's data which had been opened but evidently turned out that the customer was in­nocent. The time frame was 10 years. If an inves­tigator broke that Law he could be sentenced to 15 years of imprisonment. Word was out that this point was already in the Bill of Banking being dissected by House.

As footnote bank's secret could be defined as anything related to information on depositor client and their deposit [Article 1 paragraph 28 Law no 10 /1998 on banking]. What is meant by something re­lated to information on depositor client and his depos­it including all information on the person or body re­ceiving service in money traffic, at home or abroad, including amount of credit amount and type of cus­tomer's bank account (Giro deposit, fixed deposit, Ta­banes, certificate and other promissory notes), trans­fer of money issuance of bank guarantee, discount of promissory notes, and credit extention.

Bank's secrecy was regulated in Article 40 Law of Banking 1998. According to the stipulation in that chapter: Article [1] states that banks are obliged to keep as secret the depositor and his deposit, ex­cept in conditions as described in Article 41, Article 41A, Article 43, Article 44 and Article 44A.

Article [2] mentioned stipulations as intend­ed in Article [1] applied also on the affiliated party. Based on the stipulation, it was clear that matters to be kept as secret by bank/the affiliated party was only information the depositor client and his depos­its.

In the event that the depositor customer was also a debitor, bank was obliged to keep as secret information on customer in his capacity as deposi­tor client. Meaning if the customer was only in the position as debitor the information on debitor client needed not be kept as secret by the bank and the af­filiated party. Hence the bank's secret was only about the depositor and his deposits, other information was no secret.

What was meant by Depositor Client was the Customer who placed his fund in the bank in the form of deposit based on bank's agreement with the re­lated customer [Article 1 paragraph 17 no. 10/19981 and what was meant by deposit was the fund en­trusted by the people to the bank based on Agree­ment of money deposit in the form of Giro, Fixed De­posit, Deposito Certificate, Savings Account and/or other equivalent (Article 1 paragraph 51 Law no. 10 / 1998.

In Article 40 paragraph 1 Law of Banking it was stipulated that "It is mandatory for banks to keep depositor client's data a secret" except in circum­stances as intended in Article 41, Article 42, Article 43, Article 44, and Article 44A. The word "except" was understood as restriction on the effective time of bank's spirit.

In particular, matters related to taxation, about information mentioned in the above chap­ters, banks were not allowed to keep them a secret [meaning they could unveil] for the sake of taxation in accordance with Article 41 paragraph 11] Law of Banking. It was stated: "For the purpose of taxation, the management of Bank Indonesia by request of the Ministry of Finance has the authority to issue a com­mand in writing to the bank to inform and produce written evidence on customer's financial state of De­positor Client to tax authorities.

So in fact the Dir. Gen of Tax had access and authority to find out data of customer's account pro­ vided it was in accordance with the above Article. About bank's secrecy, Alfred Stock and friends in 2014 made survey in 37 countries and found some interesting facts.

Firstly, bank's secrecy was regulated by the Law on Banking but still serve taxation interest. Of 35 out of 37 countries, information on taxpayer's data could be opened for the sake of taxation. Meaning in spite of bank's secrecy, the secret could be disclosed for the sake of tax.

Secondly, access to bank's data could be ob­tained by request. Still the procedure of data applica­tion was regarded as insufficient by tax authorities. There were 13 countries which had rule on access to bank's data automatically, this was among others done by Slovenia, Portugal and Australia.

Thirdly, 32 out of 37 countries authorized data requesting to tax authorities. The tax author­ity could be from the management helm at headquarters level, head of regional office last in South Korea/of tax authorities at city level last in Argentine].

Fourthly, legal base which regulated access to bank's data for taxation. In general, this was regu­lated jointly by taxation and banking rules. 23 out of 37 countries were applying this platform.

Fifthly, customer's data was not only acces­sible during investigation, but also in other stages like examination, objection or invoicing.

Sixthly, protection of taxpayer's rights by 58% of countries where data was available had no rules which obliged banks to inform taxpayers.

However 82% samples firmly forbade fish­ing expedition practices, i.e. demanding bank's in­formation without definite criteria or simply trying to find mistakes with taxpayers. Furthermore, in sample countries being inquired more than 94% were willing to put sanction if tax authorities evidently abused taxpayer's data.

What, then, was being applied in Indonesia? Again Article 41, paragraph 1 regulated, for the sake of taxation, the Dir. Gen of Tax could access information of evidence in taxpayers financial data. In fact this clausule had opened wide access to tax officials. This point was a gate of entry tax officials to effectively control and tap tax resources. So the aim of Article 41 paragraph [1] of the Law of banking was in line the implementation trend globally. (SS)

Business New - March 21, 2014

No comments: