Fiscal policy ‘key to growth if rate rises’
THE CENTRAL BANK hinted at the Bank Indonesia (BI) Board of Governors meeting yesterday at increasing its benchmark seven-day reverse repo rate in trying to maintain the rupiah exchange rate at its reasonable value.
Should the decision be made, it would end the era of low interest rates that has become one of the country’s economic growth-pushing factors.
Finance Minister Sri Mulyani Indrawati said the fiscal policy would be important in maintaining economic growth amid the withdrawal of foreign funds from Indonesia as an impact of the “normalisation” of the world’s economy.
“Our challenge is fiscal. While we have to collect taxes, we have also to offer incentives,” Sri Mulyani said at the annual bankers’ gathering, themed “Fiscal Policy Reform as a Stimulus to Boost the Economy”.
She added that after revising a tax holiday regulation, which was mainly for investments starting from 500 billion rupiah (US$35.49 million), the government was currently revising a regulation on tax allowances for investments below 500 billion rupiah.
“[The revision] of a regulation on tax allowances is in the finalisation process. Investors do not need to worry about taxes. They have a long time [until the government collects taxes],” Sri Mulyani added as quoted by kontan.co.id. Under the newly issued Finance Ministry Regulation No 35/2018, the government offers simpler procedures and more attractive incentives.
Old companies can now obtain a tax holiday for expansions, as well as a tax deduction rate of 100 per cent for five to 20 years, and more business players are now eligible for tax incentives.