Case Detail :Chasing Taxes

Indonesia and India have embarked on big, bold and historic hunts for hidden assets. The moves come amid a global shift in attitude toward tax avoidance and offshore holdings but the emerging economies have singular reasons for seeking undeclared riches. Each wants fresh cash for much-needed infrastructure projects and a chance for a fairer distribution of wealth.

In the last days of September, in the dark of 3 a.m., people began queuing outside a single government building in central Jakarta. They were clutching financial papers that in some cases exposed offshore accounts worth billions of rupiah. Two months earlier, President Joko Widodo had launched a massive tax amnesty campaign to repatriate hidden assets to Indonesia. As the first reporting deadline loomed, crowds swelled into the office that handles the tax affairs of the country's wealthiest individuals and companies.

More than 10,000 people a day answered the president's pitch in September: declare assets now and take advantage of a discounted tax rate -- as little as 2% compared to 25% -- and, in turn, be part of Indonesia's future. Revenue from the nine-month amnesty, continuing through March, is promised to build railway networks, ports and airports in a country whose prospects, politically and economically, have been on the ascent.

Widodo, who was elected in 2014, has cast the program as good for business -- and pivotal to the next generation. Twice before Indonesia tried amnesties to lure money back home but those efforts in 1964-65 and in 1984 failed, in part, due to poor incentives. Now Indonesia has calculated that political stability and a dramatic drop in the tax rate could help to bring in an estimated 11,400 trillion rupiah ($851 billion) parked overseas.

"We have a large amount of money outside," Widodo told a group of businessmen in Jakarta this summer. "What is most important now is to bring this money back to our country. We need your participation right now to build the nation."

Indonesia's call for revenue echoes across many countries in Asia where private wealth has risen steeply in the past decade. New wealth accounts for about 60% of the total wealth growth in the Asia-Pacific region excluding Japan and, by 2019, the region is expected to account for 26% of all global financial wealth, according to a recent Boston Consulting Group report. It is those potential taxpayers that emerging economies want to rein in as partners in their next phase of development.

People streamed to banks in New Delhi to try to withdraw or deposit old currency notes banned on Nov. 8. India has taken more radical steps this year, starting with amnesty and then launching a wholesale assault on its shadow economy by banning high-denomination bank notes. Life in the cash-starved society has morphed into a kind of collective suffering. But both India and Indonesia see their experiments as helping to secure economic ballast at a critical time to attract domestic and global investment. Transparent accounting at home will help each country to prepare for tougher global standards for financial information that will go into effect next year.

Indonesia's hunt for revenue is spurred by ambition for this country of 20 million taxpayers. It has enjoyed 5% annual growth for the past few years. In order to keep this growth momentum, the country needs to build and improve its infrastructure such as airports and power grids. The government has estimated 5,500 trillion rupiah is needed through 2019 for infrastructure; the state budget can likely cover a quarter of that.

Amnesty became appealing first to trade associations, law firms and major developers that liked the lower tax rate -- and possibly saw future government contracts for big construction. Wealth managers said tax rates were locked in depending on how early declarations were made. That sparked the September rush. "Just with 2% or 4%, you can bring the 'dark' money under the sun," said a private banker in Singapore. "Once you declare amnesty, the money is no longer 'dark.'"

1.Provide a brief summary of the case?

2.What common initiative both countries have taken?

3.What success you predict for the Indonasia's call for revenues ?