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)