S’pore Govt rebuts claims that it benefits more from a tax agreement with Indonesia
A news article from CNBC Indonesia claims that the Singapore-Indonesia Avoidance of Double Taxation Agreement is more favourable towards Singapore.
SINGAPORE — The Finance Ministry (MOF) has rebutted an overseas news report which claimed that it benefits more from a tax agreement with its neighbour Indonesia.
It also stressed that it “does not condone illicit activities” after the same report asserted that the tax agreement allows Indonesians to avoid taxes in their home country.
In a statement on Friday (Oct 12), the MOF said that incorrect claims were made by CNBC Indonesia in its news report, “Sudah 28 Tahun, Ternyata RI Masih Manjakan Singapura” (Indonesia Apparently Still Indulging Singapore after 28 years), published on Tuesday.
The news report quoted a tax expert, who said that Article 11(3) of the Singapore-Indonesia Avoidance of Double Taxation Agreement (DTA) — which took effect in 1991 — exempts Singapore holders of bonds issued by the Indonesian government from paying tax on interest income derived from those bonds. As such, it tilts the agreement in Singapore’s favour.
In the news report, an unnamed state official was quoted as saying that Indonesians have been making use of the DTA to avoid taxes at home. Responding to the claims, the MOF said that “it is not true that the DTA indulges Singapore”.
“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 the ministry.
“Similarly, Indonesian tax residents are exempted from Singapore tax on interest income derived from Singapore government bonds and are only taxable in Indonesia.”
The aim of provisions such as Article 11(3) is to encourage two-way investment flows, said the MOF. “Attracting investments from abroad is just as critical as attracting domestic investment, given that all investors have choices worldwide on where and how they wish to invest,” it added.
Turning to the claim that Indonesians have been abusing the DTA, the MOF said that it “does not condone illicit activities”.
“We will not hesitate to take firm action against cross-border tax evasion. If there is any specific instance of such activities, we welcome Indonesia authorities surfacing this to us, in the spirit of mutual cooperation."
Saying that Singapore has a “robust tax cooperation” with Indonesia, the ministry added that Singapore has implemented all internationally agreed standards for countering base erosion and profit shifting, and for ensuring tax transparency.
Like its neighbour, Singapore has signed the Multilateral Convention to Implement Tax Treaty Related Measures to Prevent Base Erosion and Profit Shifting to tackle treaty abuse.
“Singapore values its wide-ranging cooperation with Indonesia, and looks forward to further collaboration in tax matters,” said the MOF.
