By Gayatri Suroyo and Hidayat Setiaji
JAKARTA (Reuters) – Indonesia’s flagship tax amnesty program will likely yield only a fraction of the revenue targeted, the central bank governor said, in a blow to the government’s plan to meet its budget deficit target.
Indonesia launched the amnesty program in July, offering low penalty rates for taxpayers declaring untaxed assets at home and abroad by March 2017.
But the program has started more slowly than expected, raising doubts over whether it will generate enough revenue to meet the deficit target.
And the shortfalls could make it harder for President Joko Widodo’s government to fund ambitious infrastructure projects.
The government had banked on the amnesty to bring in 165 trillion rupiah ($12.6 billion) in 2016, to help keep the budget deficit from breaching a legal limit of 3% of GDP.
Finance Minister Sri Mulyani Indrawati estimated last month that the 2016 deficit would be 2.5 percent.
But Bank Indonesia Governor Agus Martowardojo told a parliamentary hearing late Wednesday that the central bank’s baseline model for the program points to merely 18 trillion rupiah of revenue in 2016 – only 11% of target – and 3 trillion rupiah more in 2017.
Assets repatriated home under the amnesty would probably amount to just $13.8 billion, he said.
In April, before parliament approved the amnesty, the governor predicted it would attract home about $42 billion.
On Wednesday night, Martowardojo told parliament “we’re being conservative about our outlook based on the latest development of the tax amnesty.”
He noted that 1-1/2 months after its launch, the amnesty revenue was less than 4% of the government’s target.
Indrawati, who attended the parliamentary hearing, declined comment on the central bank’s revised forecast.
The ministry’s tax office, which runs the amnesty program, said its revenue target was unchanged.
“We hope it can be achieved. We will never be satisfied,” Ken Dwijugiasteadi, director general for taxes, told Reuters.
Hestu Yoga Saksama, a tax office spokesman, said it has no plans yet to extend the deadline or change amnesty tariffs.
MANY QUESTIONS REMAIN
The tax office hopes that more Indonesians will follow the footsteps of billionaire James Riady, who last week announced participation in the amnesty.
Riady, chief executive of Indonesian property-to-media conglomerate Lippo Group, did not disclose the value he declared.
Anticipation of large inflows has aided some Indonesian shares this year, and property firms have tailored their marketing to target amnesty participants.
Several wealth managers and analysts said potential participants are still seeking to understand the amnesty’s terms and options as well as its attractiveness for them.
Taxpayers with assets abroad have an option to leave them there, and pay a higher penalty than if the money comes home.
“People are seeing this as an opportunity (to declare wealth), but they have a lot of questions and the window for them, time-wise, is too short,” said Winston Sual, president director of Jakarta-based Panin Asset Management, which manages 11 trillion rupiah in funds.
“They need time to consider everything especially if they have large wealth in various assets,” Sual said.
He said participation rates could rise later.
“The market has realised since the beginning that the government’s target is high,” Sual said. “We are seeing in the past few weeks a pretty good progress compared to the earlier weeks.”
(Additional reporting by Fransiska Nangoy and Cindy Silviana in Jakarta and Saeed Azhar in Singapore; Writing by Randy Fabi and Eveline Danubrata; Editing by Simon Cameron-Moore and Richard Borsuk)