Tue, 29 Jul 2003

JSX requests for tax incentive

The Jakarta Post, Jakarta

The management of the Jakarta Stock Exchange (JSX) has asked the Directorate General of Taxation to provide tax incentives to publicly-listed companies.

The request was put forward during a meeting between the JSX and tax officials late last week. It was not immediately clear whether the tax office would grant the demand.

JSX director Harry Wiguna was quoted by detik.com as saying that the facility was expected to lure more companies to go public and list their shares on the exchange.

Earlier last month, the JSX revised downward its performance target for the year, citing unfavorable global economic conditions, which had affected the local stock market. The bourse management, for example, cut the number of initial public offerings (IPOs) this year by half to around 20. So far, only three companies have made IPOs and listed their shares on the exchange.

Harry said that providing tax incentives for listed companies was valid because listed companies had been more transparent than non-listed companies, which make the former less prone to evade their taxes as they were being monitored by many parties including the JSX, the capital market supervisory agency (Bapepam), and also the public.

"It will be difficult for them to manipulate taxes. Because once they get caught, the sanction is severe," he said.

He added that although the government would loose tax revenue by providing the facility, in the long-run as more companies went public the effect would be good for the overall economy.

However, the JSX demand may be difficult to realize as the government is under pressure to raise greater tax revenues to help finance the state budget amid plans to reduce the budget deficit to a much safer level and determination to lessen dependence on foreign loans.

Minister of Finance Boediono said earlier this month that the government would no longer provide tax facilities or other forms of financial incentives for the business sector due to the limited budget capacity.

Indeed, the tax office is determined to press ahead with a plan to impose income tax on interest gains from mutual fund investment, despite strong criticism from industry players.