Forex tax canceled for IMF package
Forex tax canceled for IMF package
JAKARTA (JP): The government's decision to go back on its plan
to impose a 5 percent tax on foreign exchange purchases is to
allow the IMF-sponsored reform package to stabilize the rupiah, a
senior official said yesterday.
Minister of Finance Fuad Bawazier said the cancellation of the
plan, announced Friday and due to be effective yesterday, was a
result of negotiations with the International Monetary Fund (IMF)
review team.
"There wasn't any pressure from the IMF," said Fuad, who is
also the director general of taxes.
Since both the tax plan and the IMF reform package are
intended to stabilize the rupiah, "we are giving the (IMF)
package the opportunity to work first ... and to prevent a
distortion caused by the tax policy," he said.
He stressed, however, that if the package failed to stabilize
the rupiah's exchange rate against the U.S. dollar, the
government would implement other measures, including taxing
foreign exchange purchases.
"It's a give and take process," he added, regarding the
cancellation of the tax plan.
Fuad said that the government and the IMF team were currently
reviewing the IMF reform package signed on Jan. 15 in exchange
for a US$43-billion bailout.
There are many areas which are still being reassessed by both
the government and the IMF review team to reflect the reality of
the present state of the economy, he said.
Since the middle of last week IMF Asia-Pacific director Hubert
Neiss has been in marathon meetings with Indonesia's new economic
ministerial team reviewing the reform package. The final results
are expected to be announced in a week.
Experts have criticized the foreign exchange tax plan, which
was intended to curb further attacks on the rupiah.
Senior banker I Nyoman Moena said that the measure would only
prevent dollar purchases by housewives and would fail to rein in
speculators.
The speculators could dodge the tax by obtaining fake letters
of credit from issuing banks, or forging Bank Indonesia letters
confirming they have to repay offshore debts, he said.
The tax plan exempted importers or those repaying offshore
debts.
Economist Anwar Nasution, dean of the University of
Indonesia's School of Economics, said that introducing the forex
tax would aggravate people's diminishing trust in the government.
It would only prompt people to transfer their rupiah to
overseas banks and change them into dollar deposits, he said.
Law experts also criticized the procedure used to make the tax
law because it bypassed the legislature.
The rupiah has been in a roller-coaster ride since July and
sank to its lowest level of Rp 17,000 to the dollar in January.
The first version of the IMF reform programs, which included
dismantling monopoly, scrapping subsidies, and banking reform,
have been criticized for being in breach of the country's
constitution and failing to strengthen the ailing rupiah. (08)
JAKARTA (JP): The government's decision to go back on its plan
to impose a 5 percent tax on foreign exchange purchases is to
allow the IMF-sponsored reform package to stabilize the rupiah, a
senior official said yesterday.
Minister of Finance Fuad Bawazier said the cancellation of the
plan, announced Friday and due to be effective yesterday, was a
result of negotiations with the International Monetary Fund (IMF)
review team.
"There wasn't any pressure from the IMF," said Fuad, who is
also the director general of taxes.
Since both the tax plan and the IMF reform package are
intended to stabilize the rupiah, "we are giving the (IMF)
package the opportunity to work first ... and to prevent a
distortion caused by the tax policy," he said.
He stressed, however, that if the package failed to stabilize
the rupiah's exchange rate against the U.S. dollar, the
government would implement other measures, including taxing
foreign exchange purchases.
"It's a give and take process," he added, regarding the
cancellation of the tax plan.
Fuad said that the government and the IMF team were currently
reviewing the IMF reform package signed on Jan. 15 in exchange
for a US$43-billion bailout.
There are many areas which are still being reassessed by both
the government and the IMF review team to reflect the reality of
the present state of the economy, he said.
Since the middle of last week IMF Asia-Pacific director Hubert
Neiss has been in marathon meetings with Indonesia's new economic
ministerial team reviewing the reform package. The final results
are expected to be announced in a week.
Experts have criticized the foreign exchange tax plan, which
was intended to curb further attacks on the rupiah.
Senior banker I Nyoman Moena said that the measure would only
prevent dollar purchases by housewives and would fail to rein in
speculators.
The speculators could dodge the tax by obtaining fake letters
of credit from issuing banks, or forging Bank Indonesia letters
confirming they have to repay offshore debts, he said.
The tax plan exempted importers or those repaying offshore
debts.
Economist Anwar Nasution, dean of the University of
Indonesia's School of Economics, said that introducing the forex
tax would aggravate people's diminishing trust in the government.
It would only prompt people to transfer their rupiah to
overseas banks and change them into dollar deposits, he said.
Law experts also criticized the procedure used to make the tax
law because it bypassed the legislature.
The rupiah has been in a roller-coaster ride since July and
sank to its lowest level of Rp 17,000 to the dollar in January.
The first version of the IMF reform programs, which included
dismantling monopoly, scrapping subsidies, and banking reform,
have been criticized for being in breach of the country's
constitution and failing to strengthen the ailing rupiah. (08)