Jakarta, April 25 (Antara) The Indonesian government is now submitting to the House a tax amnesty bill which, according to the country's central bank, Bank Indonesia (BI), could facilitate the repatriation of about Rp560 trillion of assets stacked abroad so far.
The House of Representatives (DPR) will likely finish deliberations on the bill by the end of next month (May). If endorsed into law and implemented, about 60 percent of assets worth Rp3,147 trillion could be eligible for tax amnesty or pardon.
The Global Financial Integrity 2015 data showed funds belonging to Indonesians stashed abroad totaled Rp3,147 trillion. However, not all of the amount could get tax amnesty.
According to BI Governor Agus Martowardojo, only about 60 percent of the total funds abroad could be pardoned based on the tax amnesty scheme.
The remaining 40 percent could not receive the tax amnesty facility because the funds were gathered through illegal sources, such as corruption, narcotics trade and human trafficking.
However, with the repatriation of 60 percent of the assets, BI forecast that the country can increase its revenue by Rp45.7 trillion if the tax amnesty policy is implemented.
"If tax amnesty law is followed with an improvement in the country's taxation and administrative systems, it will increase the ratio of tax to Gross Domestic Product," BI Governor Agus Martowardojo said in Jakarta on Monday.
Agus is of the view that the implementation of the tax amnesty could have a positive impact on the government's fiscal policy and domestic financial market. Yet, the positive impact could be realized only if it is followed by comprehensive polices for administrative tax reforms, a better tax infrastructure and consistent law enforcement.
In order to have an impact on the financial market, the tax amnesty policy should also be followed by financial instruments to accommodate the repatriated funds.
As per the BI governor, the Rp45.7 trillion additional income could jack up tax receipts, targeted this year at Rp1,360 trillion, up 24.7 percent from the tax realization figure of 2015.
In the financial market, Agus saw that the penitential levied on fund repatriation amounting to Rp560 trillion should be absorbed by the country's long term financial instruments. A swift flow of funds into the country, he said, could spark turmoil and speculative buying in the financial market if the funds are not accommodated by adequate financial instruments.
"We should boost the repatriation of funds, absorbing these into long-term financial instruments so that it would not become a burden on the macro economy in the short term," noted the BI governor.
Based on BI's experience, the inflow of funds from a tax amnesty scheme triggered increased demand for state debt papers (SBN). SBN is one of the financial instruments being prepared by the government to facilitate the inflow of fund repatriation.
If demand is higher than the availability of SBN, it is feared it would even put pressure on the price of the state debt papers. It could also bring down the interest rates at the inter-bank money market. On the other side, the banking liquidity will increase and boost credit extension.
Therefore, President Joko Widodo (Jokowi) asked his ministers to prepare investment instruments to facilitate the inflow of capital in the run-up to the endorsement of the tax amnesty bill.
"We want to soon prepare investment instruments. We should think of the instruments needed towards that end," President Jokowi said during a meeting at his office on the tax amnesty issue on Monday.
The head of state said his side respected the legislation process with regard to the deliberations by the lawmakers on the Bill on Tax Amnesty (RUU Tax Amnesty). But he wanted anticipatory steps in the face of the possibility of the inflow of large funds once tax amnesty scheme kicks in.
"We have to make preparations to deal with the possibility of the inflow of large funds for portfolio or direct investment," the president said.
Therefore, instruments for portfolio and direct investments should be prepared. "I hope the BI governor, the chairman of the Financial Service Authority (OJK) and the Finance Ministry will prepare instruments for portfolio or direct investment," the President said.
OJK Chairman Muliaman Hadad said at the Parliament on Monday that his side had studied the possibility of the repatriation of assets abroad and had come up with several options.
He said that the repatriated funds which were required to be kept home for at least three years could later be used to reinforce the capital of banks.
One option is that the inflow of funds could be used to increase banking capital and be invested in financial instruments such as SBN, or deposited with banks in the form of state-owned enterprises bonds.
In the meantime, Finance Minister Bambang Brodjonegoro said the government is readying financial market instruments in anticipation of funds repatriated by tax payers abroad.
"We are keen to bring the money back. If there are names of Indonesian tax payers in the 'Panama Papers,' we appeal to them to repatriate their funds. We will prepare state debentures (SUN), SUN of state-owned firms (BUMN), or corporate bonds, and a year-term time deposit," Bambang stated.
The finance minister remarked that preparations were important with regard to deepening the financial market to offer options to tax payers keen on repatriating their funds to Indonesia to be participants in the development funding process.
"We certainly hope for the best and assure that our system can accommodate the repatriation of funds as banks are expected to absorb the liquidity and channel it towards productive activities," he noted.
Bambang pointed out that the deepening of the market was also necessary as third-party funds and bank deposits as well as the transaction value in the Indonesian capital market were still small as compared to those in Singapore, Malaysia, and the Philippines.***3***(A014/INE)EDITED BY INE/H-YH(T.A014/B/BESSR/A/Yosep) 26-04-2016 00:00:0 |
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