JAKARTA: A law passed recently by Indonesian lawmakers will give broad protection to buyers of special bonds issued by sovereign wealth fund Danantara, according to details made public over the weekend, raising concerns among experts that they could be used to launder money.
The new law was passed by parliament on June 4 with the main aim of boosting the role of the central bank in President Prabowo Subianto's ambitious growth plans, further raising concerns about the government's ability to interfere in monetary policy.
But according to new details disclosed on Saturday (June 20), the law also guarantees that purchases of Danantara's controversial Patriot bonds or "merah putih" ("red and white") bonds will be protected from any potential criminal and tax-related prosecution, as well as civil lawsuits.
"Perpetrators of corruption and transnational money laundering who commit financial crimes could use these instruments to launder their illicit proceeds," warned Nailul Huda, a director at the Centre of Economic and Law Studies (CELIOS), in a statement on Monday.
Spokespersons with the finance ministry, the president's office and Danantara did not respond to requests for comment.
A new tax amnesty scheme?
The new rules also explicitly named participants in official government tax amnesty schemes as being eligible to buy the bonds.
Previous such schemes launched by the finance ministry in 2016-2017 and in 2022 were designed to shrink Indonesia's grey economy, expand its tax base and repatriate assets stashed overseas.
But while authorities have promised to crack down hard on future tax evasion, the schemes allowed holders of undeclared assets to escape punishment as long as they adhered to the programme's terms and conditions.
Rahma Gafmi, an economic professor from Airlangga University, said the legal protections in the law appear to have the same objective as the previous tax amnesties.
More detailed implementing regulations are needed to "serve as a legal brake to ensure this extreme incentive does not go out of control and become the mass facilitation of illegal money laundering," she warned.
Vaudy Starworld, who chairs Indonesia's tax consultants association, said the law could also have been designed to diversify the source of funds for national development, though he said the government "must uphold the principles of legal certainty, equality before the law and tax justice."
Under the previous amnesty programmes, there were clear rules about the penalties that participants must pay for unpaid taxes, and a clear timeline, he added.
Danantara sold at least 50 trillion rupiah (US$2.81 billion) of Patriot bonds to Indonesian tycoons last year, which carry below-market returns but were marketed as a way for the business community to contribute to Indonesia's development.
It is not clear when Danantara plans to sell the merah putih bonds, or how many will be sold.
Concerns about Danantara's capacity to manage Prabowo's spending plans are growing as the fund takes on an increasingly broad and politicised role.
A Danantara unit raised an upsized US$1.5 billion in its debut US dollar bond sale this month, which Danantara said reflected investor confidence. - Reuters
