Finance Minister Bambang Brodjonegoro had previously forecast that taxpayers registering to avail the tax amnesty program would declare their overseas assets, estimated to be around Rp4 thousand trillion, while an amount to the tune of Rp1 thousand trillion is expected to flow in as repatriated funds.
The government hopes to mop up Rp165 trillion in taxes from tax redemptions and asset declarations prompted by the repatriated money.
To absorb the funds, the Office of the Coordinating Minister for Economic Affairs will soon decide upon certain priority projects backed by the government.
"We will hold a meeting with the State-owned Enterprises (SOE) to carefully formulate projects and set criteria to ensure that those placed best can receive these funds through sale of shares and the issuance of bonds or securities," Chief Economic Minister Darmin Nasution said in Jakarta on Thursday.
The minister said that besides opting to invest in the governments projects at home, taxpayers availing of the tax amnesty program could also opt to use their own funds to expand their private businesses in the country.
The government is also in the process of identifying activities in which tax amnesty participants could utilize their repatriated funds, such as by investing in business within the Special Economic Zone (SEZ).
According to Law No. 39/2009, an SEZ is a zone with certain borders and facilities inside Indonesia designed to carry out economic activities.
Besides, the privatization of SOE companies could also become investment instrument for tax amnesty program participants who want to park their funds there. "There are companies that opt for right issues. Even in the coming one week, we will see the issuance of bonds, securities and real estate investment funds (DIRE)," Darmin said.
Regarding DIRE, the office of the Coordinating Minister for Economic Affairs will invite concerned regional governments and will offer them a cut on the cost of obtaining land and building rights (BPHTB), particularly for infrastructure and property businesses which need large swathes of land.
Regarding the issuance of bonds to accommodate the repatriated funds, the state-owned electricity company PLN has expressed interest to issue bonds.
According to PLN President Director Sofyan Basir, PLN is ready to issue bonds to take advantage of the tax amnesty fund.
"The SOE ministry has asked PLN to take part in the efforts to absorb the repatriated funds that will flow in once the Tax Amnesty Law is implemented. We (at the PLN and other SOE companies) have been asked to gather finance directors to discuss the matter with Mr Aloysius (the deputy minister of SOE for restructuring and business development)," noted Sofyan.
However, Sofyan did not disclose the value of the bonds and when these would be issued.
"We have not taken a decision yet. This is because PLN financing could also be obtained from deposits and equity, including short term loans," he said.
He said the PLN would issue the bonds before the end of the Tax Amnesty period on March 31, 2017. After all, PLN has many power generating projects, and a decision has to be made about which ones can be financed through loans and which ones through bond sale yields.
In the meantime, state-owned construction company PT Waskita Karya has also expressed its willingness to use the repatriated funds by issuing bonds.
"We have set a target to attract Rp5 trillion from the repatriated funds through the sale of bonds. We hope we can realize it this year (2016)," President Director of Waskita Karya M. Choliq said in Jakarta on Thursday.
Choliq said the repatriation of the funds from tax amnesty would be very useful for the company which could access these funds through various investment instruments.
He explained the governments policy to facilitate the repatriation of the funds through the tax amnesty policy and channel these for infrastructure development and called it a good step.
"Infrastructure SOEs badly need capital for investment. The repatriation of funds is expected to help support the success of national development programs," said Choliq.
He said Waskita Karyasneed for capital expenditure to finance its contracts in 2016 is in the range of Rp100 trillion. "The options to obtain financing can be through initial public offering (IPO) and stake sale, in this case the issuance of bonds," he said.
Indonesia Bond Pricing Agency (IBPA) predicted the countrys bond market would be brisker following the tax amnesty policy.
"Tax amnesty would have a significant effect on the bond market in the country as a result of the expectations that huge amount of funds will be repatriated into the country," IBPA director Wahyu Trenggono said here on Thursday.
The House of Representatives approved and passed tax amnesty bill into law last month, and this is expected to trigger large scale repatriation of funds by many rich Indonesians who had parked these abroad.
Wahyu said investors would look for investment instruments, such as bonds which give good yield with less risk.
"After the Brexit sentiment, the bond yield continued to decline to 7.6 percent. When the tax amnesty law was approved, the yield was 7.2 percent," he said.
The decline in bond yield shows the market has developed better confidence, he added.
"This shows that both foreign and domestic investors see the tax amnesty policy is having a positive impact and the sentiment would last quite long," he said.
He said the IBPA has predicted that bonds worth Rp70 trillion are likely to be issued in 2016.
So far, 28 bonds, including Sharia bonds, have been issued this year, accounting for a value of Rp43.8 trillion. These were issued by 23 issuers, he said.
Earlier, before the tax amnesty law kicked in, corporate bonds were already on the rising trend, he said.(*)
Reporter: Andi Abdussalam
Editor: Heru Purwanto
Copyright © ANTARA 2016
