Indonesia Plans Tax Cuts to Curb Rupiah Volatility and Boost Economic Growth
Indonesia plans to cut taxes for local exporters in a bid to boost the country’s foreign exchange reserves, while supporting the rupiah, as part of its second policy package. Indonesia’s rupiah has depreciated 18.1 percent since the start of 2015 due to looming higher US interest rates, low commodity prices, and China’s yuan devaluation. The government now plans to cut income tax on interest that exporters earn when depositing their export proceeds in local banks. Currently, income tax on bank interest (from deposit accounts) stands at 20 percent.
Indonesian Finance Minister Bambang Brodjonegoro said this incentive would make it more attractive for exporters to keep their proceeds in Indonesia. He added that the size of the tax cut has not been decided yet. The figure will probably be announced within a couple of days.
On 9 September 2015, Indonesian President Joko Widodo unveiled the nation’s first economic policy package, encompassing major deregulations aimed at boosting investment in Southeast Asia’s largest economy. Details of the second package are expected to be revealed shortly.
Meanwhile, the government of Indonesia also plans to slash the country’s corporate income tax rate from 25 percent to 18 percent in 2016, according to a statement from Coordinating Minister for Political, Legal and Security Affairs Luhut Panjaitan quoted in Indonesian media. Last month, Finance Minister Brodjonegoro said the government will propose revisions of Indonesia’s income tax law to the House of Representatives (DPR) in 2016. This proposal includes a lower corporate income tax.
Indonesian Rupiah versus US Dollar (JISDOR):