BAPEPAM seeks to end double taxation
BAPEPAM seeks to end double taxation
JAKARTA (JP): The liberalization of foreign ownership of mutual funds shows the Indonesian government's commitment to developing investment funds, in an effort to enlarge the domestic-investor base.
The chairman of the Indonesian Capital Market Supervisory Agency (BAPEPAM), I Putu Gede Ary Suta, told reporters here yesterday that besides allowing foreign ownership of 100 percent of a mutual fund, the agency will also try to abolish double taxation in the stock market which may hinder the growth of the funds.
Putu said an investor in the local stock market has to pay income tax on both capital gains and dividends. If a mutual fund buys or sell shares, the capital gains go to the fund not to the investors. They should not pay such income tax twice, he believed.
Putu said that a mutual fund will help retail investors who are not familiar with research reports by analysts. "Investing through mutual funds promises a better return than time deposits," Putu asserted.
Putu said that mutual funds potentially offer a good return because they are allowed to invest in stocks as well as financial instruments.
"However, they are not allowed to buy shares of a foreign public company or to invest in an overseas money market," Putu said.
He added that the government has yet to decide whether a mutual fund can invest in an overseas money market.
"We are still working on it. So, please, wait and see," he said.
A director of PT Mashill Securities, Isaka Yoga, noted that initially it might not be easy for a fund manager to sell the shares of a mutual fund to local investors.
Yoga said that most of Indonesian investors are short-term oriented, while an open-ended fund, which is required to buy back its shares when the investors return the shares, need long-term oriented investors.
Citing an example, he said that when PT BDNI Reksadana (mutual fund) was listed on the stock exchange last year, its share price could not go up because of selling pressures on the first trading day.
Putu said that the regulation which allows 85-percent foreign ownership of a publicly-listed securities company is intended to provide equal treatment because foreign institutions have been allowed to own a maximum of 85 percent of the shares of a securities company through direct investment. (08)