Error
  • SERVER_CONNECT_FAILED, failed to open stream: php_network_getaddresses: getaddrinfo failed: Name or service not known
  • SERVER_CONNECT_FAILED,
  • SERVER_CONNECT_FAILED,
  • SERVER_CONNECT_FAILED,
  • SERVER_CONNECT_FAILED,
  • SERVER_CONNECT_FAILED,
  • SERVER_CONNECT_FAILED,
Close
< October 2019 >
Mon
Tue
Wed
Thu
Fri
Sat
Sun
 
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
 
 
 

Stock Index
Bahana Securities

23 Oct 2019 | 17:11 WIB
INDEX
SCORE
POIN
%
Last 1 day
Last 1 day
Last 1 day
Last 1 day
Last 1 day
Last 1 day

Currencies
Bahana Securities

23 Oct 2019 | 17:11 WIB
KURS
BUY
SELL

Seventh economic stimulus package

On 4 December, the government announced its seventh economic stimulus package, aiming to provide incentives for labor-intensive industries ease certain land-certification processes and reaffirm the existing investment (BKPM) policy for a 3-hour business permit process.

At this stage, the government continues to cut several tax rates, undermining its tax revenue collection as we head into 2016. The announced tax cuts are:

1. Employees who make up to IDR50mn/annum in companies with more than 5,000 employees and export at least 50% of their sales would see 50% added personal income tax cut for the next two years, with possible enhancements. This measure is meant to put more money in consumers’ pockets, following previous measure to allow for higher non-taxable income from IDR24mn to IDR36mn (exhibit 1). However, we see the impact of this policy action to be minimal raising annual labor income by just 0.7% in 2016 or 1.87% in total (together with higher non-taxable income to IDR36mn).

2. For five industries (i.e. shoes, sports shoes, field-engineering shoes, textiles & garments and leather apparels), there is a new measure to allow for 5% lower tax when investing in Indonesia over the next 6 years. Additionally, the loss carry forward (loss compensation) period is being increased to 10 years from 5 years. Separately, there is also lower dividend tax to 10% from 20% previously, also being implemented for overseas companies.

The new economic package also simplifies the process for obtaining 5-year building permits for street vendors.  Owners of street vendors on state owned land can use the building’s rights as collaterals for subsidized micro loans (KUR).

This is a positive move, as during periods of downturns and high unemployment, more people are joining the informal economy. That said, implementation is likely to be difficult as this is the first measure to address these types of businesses.

The above-mentioned measures should help to provide a basis for economic recovery, with tax cuts and allowances becoming major parts of the stimulus. These should help our estimate for a GDP growth recovery to 5.1% in 2016. However, the latest tax measures are not supportive for tax collection, in our view, as slower economic growth periods typically lead to lower tax revenues.

As of 11M15, tax collection amounted to only IDR806tn (27th November) while customs & duties fees reached just IDR140tn, resulting in tax, customs & duties revenue of IDR946tn (64% of government target, 88% of Bahana target).

Thus, we expect the 2015 budget deficit to represent 2.7% of GDP and remain at the 2.7% level in 2016, as we continue to expect IDR300tn of tax shortfall next year. In 2016, we look for growth support to come from stimulus measures instead of government spending.


❮ Back to previous page