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Indonesia govt considers slashing income tax for bondholders


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JAKARTA (TheInsiderStories) – Finance Ministry is considering to slash income tax for bondholders from 20 percent to around 0 percent as a move to attract more investors on the government bonds issuance. The ministry expects the revision of the income tax ruling to be submitted to the Parliament after the discussion of tax amnesty is finalized.

“For corporate bonds, we still have to discuss again with the director general of finance and risk management,” the Head of Fiscal Policy at the Finance Ministry Suahasil Nazara said.

Finance Minister Bambang Brodjonegoro said the deduction of tax will also enliven the issuance of corporate Sukuk (sharia bonds). Apart from the tax incentives on the demand side, the government will also strengthen the supply side with more variants Sukuk issuance.

In total, there are 8 series of retail Sukuk that have been issued by the government whose values rose from Rp 5.5 trillion in 2008 to Rp 31.5 trillion. As for the US dollar-denominated Sukuk which was first issued in 2009, the outstanding has reached US$9.5 billion.

“The proceeds from the Sukuk issuance will be used to finance 45 percent of infrastructure projects such as railways, highways, bridges, and others on 2015-2019 which reached Rp 5,000 trillion,” he said.

He added the global Islamic finance industry’s total assets at the end of 2014 reached $2.1 trillion, with average annual growth (CAGR) in the period of 2009-2014 reaching 17.3 percent. Islamic banking and Sukuk each contributed 80 percent and 15 percent of the total global assets of Islamic financial industry.

At the end of 2014, the total assets of Islamic banking is estimated to reach $1.7 trillion at a CAGR of 14.1 percent during the period 2009-2014.

Deputy Superintendent of the Capital Market Financial Service Agency (OJK) Sarjito stated that the corporate sector interest in issuing Sukuk is still very low. Since the first corporate Sukuk launched in 2012 (Indosat Mudharabah), outstanding corporate Sukuk per May 4 stood at $718 million, or 3.68 percent of total Sukuk issuance. Most proceeds were directed to the infrastructure and transport sectors, amounting to $352.6 million or equivalent to 49 percent to total issue.

To improve corporate Sukuk issuance, the OJK offers several incentives such as cutting the registration fee to 0.05 percent of the value, a maximum of Rp 150 million for bonds and a maximum of Rp 750 million bond to bond. He called on state owned companies (53 SOEs) engaging in the infrastructure sector (of a total of 119 SOEs) to issue more Sukuk. (*)

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Source: The Insiderstories
Indonesia govt considers slashing income tax for bondholders

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