JAKARTA (TheInsiderStories) – Indonesia and Singapore agreed to speeding up the finalization of bilateral trade, said the two ministers on Thursday (10/31). As known the two countries has set up six working groups to complete the deal.
The statement released by Indonesian minister of trade, Agus Suparmanto, and Singapore’ minister of trade and industry, Chan Chun Sing, in Bangkok, Thailand, on Thursday (10/31).
“Indonesia is pushing for the entire text of the agreement to be finalized and negotiations on market access will be completed immediately so that RCEP can be signed at the end of next year,” said Suparmanto in an official statement.
As known, both have formed six working groups on Batam, Bintan, Special Karimun, labor, investment, transportation, agribusiness, and tourism sectors. The ministers also discussed the development of the Regional Comprehensive Economic Partnership (RCEP) negotiations and strategies in resolving issues that still pose obstacles, such as market access.
On Oct. 10, a number of agreements were reached during the Annual Leaders Meeting between Indonesian President Joko Widodo and Singapore Prime Minister Lee Hsien Loong at The Istana, Singapore. Both leaders agreed to push the completion of bilateral investment treaty ratification process was signed on May 8, 1990.
The countries also signed bilateral liquidity management arrangements, Flight Information Region (FIR), export – import data, and vocational education. In addition, the two also agreed to increase cooperation in the fields of electronic commerce, financial technology, data services, techno park development, and regional innovation hubs.
The head of state also offered Singapore to fund a number of infrastructure projects in Indonesia, such as Makassar – Parepare railroad project and the air field in Labuan Bajo, East Nusa Tenggara.
At the meeting, the two countries signed two cooperation documents namely an electronic data exchange agreement to facilitate and secure trade and a memorandum of understanding regarding archival cooperation. But no further information on tax treaty policy between the two countries.
The tax treaty is an international agreement between two countries that were made to avoid double taxation so as not to hamper the economy of the two countries. One of these policies is also used to prevent the practice of tax avoidance.
The Indonesian government has tried to renegotiate the tax treaty with Singapore to boost the tax revenues in the country. The director at the tax office at the ministry of finance, John Hutagaol said, the benefits of the Indonesia – Singapore tax treaty had the potential to be misused, in the sense, enjoyed by taxpayers who should not enjoy it.
He said, when investors from Indonesia buy bonds issued by the government through banks or securities in Singapore, they will not be taxed on the interest income earned. While, if buying using a bank or securities in Indonesia interest income taxable 15 percent.
The regulation also contributed to Indonesia’ lackluster tax revenue. Until August, the realization of tax revenue was recorded at Rp801.02 trillion (US$72.86 billion), or only grew 1.4 percent annually. The figure only reached 50.78 percent of the tax revenue target by the end of 2019 of Rp1,577.56 trillion.
Therefore, Finance Minister Sri Mulyani Indrawati stated that the government would review all agreements with countries that have tax cooperation. As is known, the double tax agreement was applied to all of Indonesia’s investment partner countries.
Singapore is Indonesia’ largest trading partner in the Southeast Asia region with total bilateral trade in 2018 reaching US$34.4 billion, an increase of 16.61 percent from in 2017 which amounted to $29.6 billion.
In the 2014 – 2018, the trend of trade between th two countries increased by an average of 4.23 percent per year. In 2018, Indonesia’s exports amounted to $12.9 billion and imports amounted to $21.4 billion.
Indonesia’ main export products are oil and gas, gold and jewelry, tin, and electronic equipment and supplies. Meanwhile, the main import products are oil and gas, gold and jewelry, chemical products, and electronic equipment and supplies.
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