JAKARTA (TheInsiderStories) - The government will roll out Ministry of Finance decree on the establishment Fund Management Contract (Kontrak Pengelolaan Dana/KPD) in the immediate future to accommodate repatriated of funds.
The Tax Amnesty Law does not specifically mention that the KPD could be used to accommodate repatriated funds.
The Tax Amnesty Law simply states that the transfer of assets may be invested in government securities, state own enterprises’s bonds and bonds of financing institutions owned by the government PT Sarana Multi Infrastruktur.
The inflow of funds, made possible by the Tax Amnesty Law, can also go to banks, private bank bonds whose trade is overseen by the Financial Services Authority (OJK), infrastructure projects developed by the government and enterprises, the real sector based on the priorities identified by the government as well as other investment constituted under the law.
OJK relaxes rules and lowers the KPD managed funds from Rp 10 billion to Rp 5 billion. The Executive Head of OJK for Capital Market Supervision Nurhaida said the revised rules allow the funds to flow directly to investment products. “The rule is expected to encourage positive sentiment in the stock market,” said Nurhaida.
However, Rudiyanto warned, the realization of these rules require strict supervision of the KPD. “It is much easier to manage the funds with funds under management of Rp500 billion compared with the KPD under Rp 5 billion, because that means there are 100 different portfolios that should be monitored,” said Rudiyanto.
The Indonesia Stock Exchange (IDX) welcome up to Rp 1,000 trillion ($76 billion) in repatriated assets in the next nine months during the government’s tax amnesty program.
IDX President Director Tito Sulistio said the trading intensity at the stock exchange has been low compared to peers in the region, leaving extra room for fresh funds. The monthly transactions in the Indonesian market average at 21 percent of its capitalization, compared to Singapore’s 40 percent, Thailand’s 70 percent and China’s 400 percent.
According to Tito, IDX has taken several measures to prepare for the inflow of repatriated assets by encouraging companies to go public and increase the number of local investors to weather the risks of capital flight amid uncertainty in the global economy.
The new law will allow taxpayers to revise their tax reports or come clean about their unreported assets without having to face criminal prosecution or massive penalty. The government even offers special tax rates as low as 2 percent if the taxpayers agree to repatriate their assets before Sept. 30.
The tax amnesty program is aimed at increasing tax revenue, improving taxpayers’ compliance and providing much-needed funding for infrastructure developments to prop up the economy. (*)