Is that the result of the tax amnesty program? It could be , as significant amount of funds are already flowed in."Jakarta (ANTARA News) - The composite index (IHSG) of the Indonesian Stock Exchange (BEI) has tended to increase after the government announced the tax amnesty program in July.
The Law No. 11 of 2016 on Tax Amnesty came into force on July 1 this year. The law gives tax payers time to report their taxable assets to the taxation directorate office until March 31, 2017.
Based on data at BEI, the IHSG on July 1, 2016 was 4,971.58 points. By the end of the first period of the tax amnesty program on Sept. 30, the index shot up to 5,364.80 points or an increase of 7.9 percent over the period.
With the tax amnesty program, the government hopes that large funds in repatriation would flow into the country and part of the fund would go to the BEI.
Many rich Indonesians are known to have large funds parked abroad either for commercial benefit or to evade taxes. Some of the funds were converted into shares or investment in various business areas.
The government hopes for repatriation of the assets by offering relatively low penalty rate of 2 percent in the first period of the tax amnesty program ending on Sept. 30.
Inflows of funds to the stock market would improve liquidity of the stock market with the fund owner expected to buy shares of the listed companies. The IHSG, therefore, would climb higher.
"I am trying to analyze average transactions daily at BEI. Earlier daily transactions averaged Rp5.5 trillion . Now the daily transactions are valued at Rp8 trillion. Is that the result of the tax amnesty program? It could be , as significant amount of funds are already flowed in," Chief Executive of BEI Tito Sulistio said.
According to the Taxation Directorate General of the Finance Ministry, on Sunday (Oct 2, 2016), the value of assets declared by tax payers reached Rp3,621 trillion including assets in the country at Rp2,533 trillion and assets abroad at Rp951 trillion and assets already repatriated at Rp137 trillion.
Tito said the frequency of transactions at BEI also increased to 253,810 much exceeding 70,000 transactions recorded by Singapore stock exchange.
"The tax amnesty program has drawn the wide attention among industrial players at the stock market as the impact of the policy is quite strong on the countrys economy," he said.
Share transactions would drive market capitalization to reach Rp6,000 trillion . Based on data at BEI, by 30 September 2016 market capitalization reached Rp5,799 trillion.
"I want market caps to reach Rp6,000 trillion this year," he said.
Market capitalization shows total value of securities listed on a stock exchange.
Stimulus of BEI
Under the tax amnesty program, the Indonesian Stock Exchange (BEI) provides generous stimulus for companies launching initial public offering (IPO) including in the form of relaxation of regulation on administrative process to 50 percent discount in initial listing fee.
"This is available during the tax amnesty program or until March 31, 2017. It was already decided though not yet announced," Corporate Evaluation Director of BEI Samsul Hidayat said.
Samsul said that process of administration for IPO could be made at once. Normally the IPO process is made by phases.
"Originally it was in sequence, now it is parallel. The process, therefore, is faster now. We could issue the initial license to be sent to the OJK (Financial Service Authority)," he said.
He said, the relaxation of the regulation, is expected to attract more companies to launch IPO that funds from the repatriation would enter the domestic stock market.
"The tax amnesty program would improve the countrys financial liquidity and the condition could serve as a good momentum for companies to raise funds," he said.
The Indonesian Stock Exchange also has simplified regulation on the process of IPO in listing shares, he said, adding, a company does not need to have net assets of at least Rp5 billion to be allowed to launch IPO. The prospective issuer, however , is required to have recorded net profit in the last year and net assets valued at least Rp100 billion.
Optimism of Capital Market
Tito Sulistio said the tax amnesty program had been a success in its first period indicating that government has prepared the program properly.
"When the government set the target, the data base was very up to date. Therefore, I am confident the target would be achieved. The prediction of those pessimistic turned out to be false," he said.
The tax amnesty program would create condition favoring the stock market, he said.
"In short and medium terms, the benchmark interest rate would decline that investors would turn to the stock market rather than putting their funds in banks," he said.
In addition, the countrys foreign exchange reserve would increase that would strengthen the position of rupiah against the U.S. dollar, he said.
Tito predicted that in the second and third periods of the tax amnesty program there are still many potential tax payers to take part in the program especially as the revisions including of regulation of the finance minister No. 127 on ownership of special purpose vehicle (SPV) abroad released only toward the end of first period of the tax amnesty program.
"In the future there would be more large companies including SMEs taking part in the tax amnesty program," he said.
Meanwhile, Vice President of Research and Analysis Valbury Asia Securities Nico Omer Jonckheere said the high enthusiasm shown by tax amnesty program participant including leaders of large companies, SMEs , even community leaders and politicians would serve as positive catalysts for the domestic stock market.
"The tax amnesty program, which is said to be the most successful in the world, and good Indonesian economic sentiment would continue to prop up the IHSG higher," he said.
The favorable development of the tax amnesty program is expected to help boost the countrys economic development, he added.
Earlier, however, securities company PT Mandiri Sekuritas said the tax amnesty program has not contributed significantly to investment in bonds and shares.
"We have surveyed in retail business. The effect is not yet significant," President Director of the securities subsidiary of state lender Bank Mandiri Silvano Rumantir said here on Sunday.
Mandiri Sekuritas is one of 19 securities traders named by the government as gateways for repatriated funds under the tax amnesty program.
"Since the day the tax amnesty program was launched by the government the daily transactions handled by Mandiri Sekuritas has not changed significantly from the average level of Rp500 billion per day. That indicated there has not been significant effect of the program on investment in bonds and shares," Silvano said.
(T.H-ASG/O001)
Reporter: Zubi Mahrofi
Editor: Priyambodo RH
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