Govt to provide tax incentives for debt restructuring
Govt to provide tax incentives for debt restructuring
JAKARTA (JP): The government will provide approximately Rp 600
billion (US$70.59 million) in tax incentives to companies who go
to the Jakarta Initiative Task Force (JITF) for help in
restructuring their debts, according to a senior government
official.
Junior Minister of National Economic Restructuring Cacuk
Sudarijanto said on Tuesday the tax incentives, which would be
offered until the middle of 2001, were part of the "carrots"
being offered by the JITF to push for more debt restructuring
deals.
Speaking at a joint media conference with Coordinating
Minister for the Economy Rizal Ramli, Cacuk said an estimated $25
billion in corporate foreign debts would mature in the short
term.
He said restructuring the debts was crucial to easing pressure
on the rupiah and the country's balance of payments. "As some of
the debts will mature in the short term, it will put pressure on
the rupiah."
He hoped the corporate debts could be extended to between 10
and 12 years to lessen demands for the dollar, which in turn
would allow the rupiah to stabilize.
Cacuk said the tax facility was made possible by the new tax
law approved by the House of Representatives in July. Under the
previous tax law, some forms of debt restructuring, such as
cutting the amount of a debt, were taxable because the indebted
companies theoretically earned "income" in the process.
JITF is under the coordination of Cacuk. The task force was
formed in 1998 to mediate between debtors and creditors in order
to help accelerate the restructuring of the country's more than
$65 billion in corporate overseas loans.
The task force has helped restructure some $5 billion in
corporate foreign loans, with a mandate to restructure another $3
billion to $5 billion by the end of this year.
The strategic objective is to restructure a total of $12
billion by April 2001.
Rizal said the government planned to meet with representatives
of indebted companies next month to push for more debt
restructuring deals.
He also said that once companies had reached restructuring
deals, it was believed they would be able to resume accepting new
loans from creditors.
Efforts by the JITF to push for more debt restructuring deals,
however, have been inhibited by negative development on the
country's political front. Analysts have said if the domestic
political situation deteriorates, it will discourage debtors from
restructuring their debts.
In addition to the various "carrots", the JITF is also
introducing "sticks", including handing over uncooperative
debtors to the Attorney General's Office to be brought to
bankruptcy court.(rei)