Tax Amnesty Euphoria
With the enactment of the Tax Amnesty Law, the month of July can be considered a historic month for fiscal policy. The law was developed by the Ministry of Finance, especially by the Directorate General of Tax, with the full support of the Association of the Employers (APINDO). The enactment of this law is a testament to the political strength of President Jokowi, who was able to influence representatives in the Indonesian parliament to give priority to this very delicate bill. Finally the Indonesian Parliament completed the legislation, and the President officially signed the law on July 1, 2016.
The response in Indonesia was unexpectedly enthusiastic. Various gatherings to promulgate this law have become popular, with a significant number of attendants. There are three parts to the tax amnesty. The first is the repatriation of assets invested offshore by Indonesian taxpayers. The second is the declaration of the assets invested offshore, while the third is the declaration of assets on shore but that have not been declared. Apparently not just the repatriation of assets, which was the most talked about policy, but also the declaration of the domestic assets, drew support. All the parts of the tax amnesty charge relatively low tariffs compared to the ordinary income tax rate.
The government has targeted Rp.165 trillion from the tax amnesty receipts, an amount that was initially perceived as too difficult to achieve. However, lately more people believe the target may be achievable, especially those who would like to declare their onshore assets. The longer-term target of the government is to arrive at a better tax database in order to increase tax revenue.
In the midst of this situation, the trade balance showed another surplus for June 2016. Indonesian exports improved significantly, followed by imports with a lower rate of growth. The surplus for June reached $900.2 million, higher than that of May 2016, at $373.6 million. Exports reached $12,917.1 million in June, an increase of $1,402.8 million or 12.18% month over month. Meanwhile, imports reached $12,016.9 million in June, an increase of $876.2 million or 7.86% month over month. For the first half of the year, exports were $69,509.9 million while imports reached $65,915.6 million, leading to a trade surplus of $3,594.3 million.
In the meantime, the month of June, which was the peak of the holiday month of Ramadan, was also marked by relatively high inflation at 0.66%, even though the rise was moderate for the month of Ramadan. Year-over-year inflation in June 2016 was 3.45%, a mild rate for the first half of 2016, which led the Central Bank to keep the benchmark rate at 6.50%.
President Jokowi also made some changes in his administration. In particular, he named Sri Mulyani, who until recently was a managing director at the World Bank, as the new Minister of Finance, replacing Bambang Brojonegoro. The changes were welcomed by the market.
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