To address Indonesia’s revenue shortfalls, the government is giving taxpayers another opportunity to report previously hidden assets as lower-than-expected growth hits the state income.
The first nine-month amnesty, which ended in March, exempted Indonesians keeping their cash hidden or overseas from criminal prosecution and imposed a small fine if they declared concealed assets. The tax office had said that once the amnesty ended, the authorities would hunt down unreported assets and impose penalties of 200 per cent of the original tax bills.
However, a regulation issued last week says that individuals and businesses which voluntarily declare assets before tax officers find them would only have to pay the upper limit of standard income tax of 25 per cent for firms and 30 per cent for individuals. A lower rate of 12.5 per cent is applied to individuals with income of below US$47,000 or businesses with earnings of up to US$355,000. The policy is scheduled to be enforced until June 2019.
It was revealed this month that Indonesia’s economy expanded at a marginally slower pace than forecast in the third quarter of this year.
GDP growth for the three months until September grew 5.06 per cent year on year, below a forecast from economists consulted by Reuters of 5.13 per cent. In the second quarter 5.01 per cent year-on-year growth was recorded in the second quarter.
In quarter-to-quarter terms, GDP grew by 3.18 per cent, below than the 3.23-per-cent predicted.
Exports rose 17 per cent in the third quarter from a year earlier, with shipments of merchandise goods rising 24 per cent.
Investment growth increased to 7.1 per cent from 5.4 per cent during the second quarter and household consumption grew 4.9 per cent in the third quarter from a year earlier and almost unchanged from the second quarter.
While rising commodity prices has helped deliver double-digit growth in exports for most of 2017 and investment increased, consumer spending and credit growth have been sluggish, despite eight rate cuts during the year. The lower-than-expected growth, when combined with low inflation, has increased pressure on Bank Indonesia to continue to relax monetary policy.
Analyst Gareth Leather of Capital Economics said: “The gradual acceleration in Indonesia’s GDP growth in the third quarter to 5.1 per cent from 5 per cent is unlikely to mark the start of a sustained recovery in the economy. Given the mounting headwinds facing the economy, we expect growth to come in at around 5 per cent over the next couple of years.”
Indonesia’s consumers have been cautious. Picture credit: Wikimedia
