Criteria set for debtors seeking tax relief
JAKARTA (JP): Chairman of the Jakarta Initiative Task Force (JITF) Bacelius Ruru said on Wednesday that companies whose debt restructuring process was mediated through the task force must meet certain criteria to enjoy a tax relief facility.
Ruru said the criteria included the companies' prospects for survival in the post-restructuring period.
"It depends on whether the debt restructuring will result in a company that is in a commercially viable position to continue operation or not," he told reporters on the sidelines of a discussion on debt restructuring.
Ruru said the technical criteria would be decided by the newly formed one-stop facilitation team which groups several related senior government officials and is coordinated by the chairman of JITF.
The House of Representatives approved earlier this week an amendment to the country's income tax law which allows a tax break for companies whose debt restructuring process was mediated through the JITF.
An indebted company whose debt restructuring process included a debt "haircut" facility from its creditors was supposed to pay tax under the previous income tax law because the company theoretically enjoys income from the debt reduction.
Ruru said according to the new tax law, the tax break would only be given to companies whose debt restructuring process was made through the JITF, not the Indonesian Bank Restructuring Agency (IBRA).
"That's the will of the lawmakers. The tax relief facility is only for the JITF," he said.
He explained the tax break was part of the incentives to be provided through the JITF to debtors who were "cooperative" in their debt restructuring process.
He said cooperative debtors were those who displayed good will to settle their obligations and had attended a scheduled creditor-debtor meeting.
JITF was formed by the government in 1998 to help accelerate the debt restructuring process of the country's business sector. But the task force only plays a mediator role. Unlike IBRA, it has no legal power to seize assets or force debtors to repay their obligations.
The task force aims to help restructure some US$10.5 billion of corporate sector debts this year, and as of July it had restructured about $5 billion.
JITF can receive its "debt restructuring case" from debtors, creditors or from the Financial Sector Policy Committee (FSPC).
The committee, which groups several senior economic ministers, said it would gradually transfer the debt cases in which IBRA was a minority creditor.
IBRA has received more than Rp 200 trillion worth of non- performing loans from closed banks and recapitalized banks.
Ruru said there were incentives to be given by Bank Indonesia, the country's Capital Market Supervisory Agency (Bapepam) and the Jakarta Stock Exchange (JSX).
He said the JITF signed an agreement with the JSX in which cooperative debtors would be protected from being delisted from the exchange within a certain time period.
But Ruru said in addition to the incentives, JITF would also impose sanctions on uncooperative debtors.
He explained that once debtors and creditors entered the JITF restructuring mechanism, they would be given a deadline to complete certain restructuring stages, and if debtors failed to meet the deadline they would be labeled uncooperative.
He said uncooperative debtors would be handed over to the FSPC and later transferred to the Attorney General's Office to file for bankruptcy.
"The government of Indonesia is committed to making the debt restructuring program successful," Ruru said.
He said the FSPC was planning to transfer more cases to JITF to push for more debt restructuring deals.
"The FSPC is considering transferring between one and three cases a month. That is a large volume, but I think it's still manageable for us," he said.
But he added a stable exchange rate was crucial to ensure a successful debt restructuring process.
He said the current exchange rate of Rp 9,000 to the U.S. dollar was not "favorable".(rei)