JAKARTA (Reuters) - The Indonesian government on Monday started the implementation of its new tax amnesty program as it seeks to boost tax revenues by encouraging the repatriation of funds stashed abroad.

A general view of the headquarters of Indonesia's tax office in Jakarta May 26, 2016. REUTERS/Iqro Rinaldi/Files

“Starting today, the tax office has started operations to service those who want to participate in the amnesty,” Finance Minister Bambang Brodjonegoro told reporters at an event in Jakarta on Monday.

Finance Ministry officials held a news conference late on Monday to announce details of the program.

The government will impose a 2-5 percent tax for assets brought back onshore by March 2017. Those assets must be kept in Indonesia for three years in funds managed by appointed banks, and can be invested in several ways, including government bonds.

Repatriated funds will be allowed to be invested in instruments like government issued securities, stocks, bonds and mutual funds issued by private companies, as well as the direct purchase of properties.

Finance ministry official Robert Pakpahan said 18 banks have met the qualifications to manage funds from the tax amnesty, which is up from seven banks announced last week.

However, the finance minister said banks still need to wait for an official appointment letter from the government to formalize the mandate.

Bank executives last week told Reuters they expect big gains from the amnesty. Bank Negara Indonesia Tbk BBNI.JK director Panji Irawan said it might receive up to 75 trillion rupiah ($5.72 billion) in inflows while Bank Mandiri Chief Executive Kartika Wirjoatmodjo said its inflows "could be huge".

The banks can manage the funds through asset management firms and brokerage houses listed by the government.

COMING HOME

Some $200 billion in Indonesian money is thought to be stashed in Singapore and wealth managers there worry an Indonesian amnesty might lead to an outflow of assets from the city-state’s massive wealth management industry.

“This will have an impact and some Indonesian money will flow out of Singapore, but still a lot of money will remain offshore,” said a Singapore-based senior private banker, who asked not to be identified because of the sensitivity of the topic.

“I have not seen tax amnesties work exceptionally well in other centers so it is unclear how effective this one will be.”

The stock market had expected the successful implementation of the bill since its passage through parliament on June 28 with the main stock index .JKSE up 5 percent and foreign investors net buying around 10 trillion rupiah ($763.65 million) since then.

Roni Bako, a tax analyst with Pelita Harapan University in Jakarta, said the expansion of the taxpayer base, which will come with the declaration of assets, is an important result of the program.

Indonesia has only around 28 million registered taxpayers, including corporations, Bako said. That compares with Indonesia’s population of 240 million.

The amnesty, however, still faces possible challenges at home with legal activists last week filing a request for a judicial review of the program in the Constitutional Court.

They say it will hurt Indonesia’s anti-graft efforts and protect tax evaders. A preliminary hearing will be set 14 days after the court verifies the documents.

(This version of the story has been refiled to clarify in third paragraph that news conference has taken place)