Tax agreement with Indonesia does not 'indulge' Singapore: Finance Ministry

Singapore’s Prime Minister Lee Hsien Loong (L) and Indonesia President Joko Widodo (R) gestures as he speaks to journalist after bilateral meeting during the International Monetary Fund (IMF) and World Bank annual meetings in Nusa Dua, Indonesia, October 11, 2018. Sonny Tumbelaka/Pool via REUTERS

It is untrue that the Double Taxation Agreement (DTA) between Singapore and Indonesia “indulges” the former, said the city-state’s Ministry of Finance (MOF) on Friday (12 October) in response to a CNBC Indonesia article.

“Provisions under the DTA are reciprocal, like any other DTA. So, under Article 11(3), Singapore tax residents are exempted from Indonesian tax on interest income derived from bonds issued by the Indonesia government, and are taxable only in Singapore,” said an MOF spokesperson.

“Similarly, Indonesian tax residents are exempted from Singapore tax on interest income derived from Singapore government bonds and are only taxable in Indonesia.”

The article entitled “Sudah 28 Tahun, Ternyata RI Masih Manjakan Singapura” (Indonesia Apparently Still Indulging Singapore after 28 years), was published on Tuesday (9 October). Among the issues raised, the CNBC report claimed that Article 11(3) of the DTA “indulges Singapore”.

The article written by CNBC Indonesia Managing Editor Herdaru Purnomoalso quoted a state official who claimed that Indonesians were making use of the DTA to avoid taxes in Indonesia. In response, the MOF spokesperson said, “Singapore does not condone illicit activities. We will not hesitate to take firm action against cross-border tax evasion.”

The ministry noted that like Indonesia, Singapore has signed the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent BEPS (base erosion and profit shifting), which tackles treaty abuse. It has also commenced exchange of information with Indonesia, including automatic exchange of financial account information.

“If there is any specific instance of (cross-border tax evasion), we welcome Indonesia authorities surfacing this to us, in the spirit of mutual cooperation.”