New plan does not include extra budget, tax cut

The Jakarta Post, Jakarta

The Minister of Finance, Boediono, said on Thursday that the latest stimulus package for businesses would not be in the form of extra budget spending, nor tax relief facilities, but would consist of policies aimed at improving the business and investment climate at home.

"The economic package is aimed at bolstering business activities. This doesn't have to be in the form of a higher budget, but more on policies to improve our business climate," Boediono told reporters.

He said fiscal stimulus was not the right path to take, as it would further burden the already tight state budget.

The government announced on Wednesday, the idea of an economic package to help cushion the economy from the impact of this week's terrorists bomb attack. It said the planned package was necessary to improve confidence in the business climate, and to further push economic growth.

Following last year's Bali bombing incident, the government provided an extra Rp 10 trillion (US$1.20 billion) to the budget, as a stimulus for the economy and the business sector.

The country's economy has been growing by a meager 3-4 percent during the past couple of years, mainly driven by domestic consumption. The government is now under pressure to push investment and to boost growth to 5-6 percent, so that more jobs can be generated. But the bomb attack at the JW Marriott Hotel in Jakarta has created new risk for investors in the country.

Boediono refused to elaborate on the kind of policies that would be the subject of change, saying that assessment process was still underway.

But the ministry's Director General of Taxation, Hadi Purnomo, said that his office was planning a new policy to speed up the tax restitution process for corporate taxpayers.

This could be seen as a stimulus for the business sector.

Businesses have criticized the current tax refund system, saying that the tax office takes a much longer time than what is required to return overpaid taxes.

Accelerating the reimbursement process would help businesses improve their cash flow, particularly at a time when banks have remained reluctant to provide affordable loans for working capital.

Corporate taxpayers are required by the law to pay a monthly installment of their income tax, based on their previous year's income. But many companies overpay their taxes because, by the end of the year, they have turned out smaller incomes than expected.

The problem is that these companies must undergo a comprehensive tax audit, a process which critics say is inefficient as it is without time limits and puts taxpayers at the mercy of corrupt officials.