Indonesia To Scrap Exit Tax

by Mary Swire, Tax-News.com, Hong Kong

18 July 2008

The Indonesian government plans to begin dismantling an exit tax on residents leaving the country in January 2009, it has emerged.

Darmin Nasution, director general for taxation at the Ministry of Finance, told the Antara news agency recently that the exit tax will no longer apply to Indonesian residents who have a tax identification number and their family members below the age of 21 from 1st January 2009.

The government's rationale behind the new policy is to encourage a greater level of participation in the tax system in a country where only a small percentage of the working population are registered for tax.

Out of Indonesia's total population of almost 240 million people - the world's fourth highest - Nasution said that only 4.9 million are registered as taxpayers.

The exit tax, a kind of departure tax, was first levied in the late 1970s and currently stands at IDR1mn (USD109) for persons departing the country by air and IDR500,000 for persons leaving the country by sea.

The government raised the rate substantially in the late 1990s - by 150% and 300% for air and sea departures respectively - amid the Asian financial crisis, in an effort to discourage residents from leaving the country and taking their money with them.

The levy raised some IDR2.5tn (USD269mn) in revenue for the government in 2007. Nasution expects this shortfall to be offset in the years ahead by an increase in the number of registered taxpayers.

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