Indonesia and Singapore are again committed to strengthening mutually beneficial cooperation between the two countries - Photo: Biro Pers

JAKARTA (TheInsiderStories) – 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, on Tuesday (10/08). At the meeting, 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.

In a joint press statement after the meeting, Widodo welcomed the agreement of the two countries regarding the Framework for FIR Realignment. In this regard, he said, the technical teams of the two countries began their meeting on Oct. 7 and are expected to produce concrete results soon.

On the financial cooperation between the central banks of the two countries, this collaboration reflects the strong commitment of the two leaders to increase stability and economic development in the region. The extension of this cooperation will be carried out in November 2019.

Widodo also appreciated the development of the Kendal Industrial Estate, which became an icon of cooperation between the two countries. The President 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.

“We welcome the follow-up to the Leaders’ Retreat agreement last year, including increasing tenants at Kendal Industrial Park, developing Nongsa Digital Park, and supporting the Singapore Economic Development Board for the opening of Pegatron’ operations in Batam,” said president in an official statement.

In addition, the two countries also agreed to strengthen cooperation in the field of vocational education, include the operationalization of the Kendal polytechnic and training activities for instructors as well as the RISING (Republic of Indonesia and Singapore) Fellowship initiative.

Finally, 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. Days ago, director at the directorate general of tax 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$56.80 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.

US$1: Rp14,100

Written by Lexy Nantu, Email: