The tax amnesty program which the government passed in June will alleviate restrictions on government spending and help growth to rebound to 5 percent this year, multinational financial services corporation Morgan Stanley told clients.
Tax collection for the first five months of the year has fallen short of its target, sparking concern drastic spending cuts will be needed to keep the deficit within the legal limit of three percent of gross domestic product.
Cuts would likely further drag the economy, which expanded at a rate of only 4.7 percent last year amid global commodity market woes.
The House of Representatives passed the tax amnesty law in an effort to avoid a downturn. The program effectively pardons tax dodgers of evasion crimes and forgoes back taxes and fines if evaders declare hidden assets or repatriate them while paying a fee to the government. The government expects the law to generate an additional Rp 165 trillion ($12.4 billion) in tax revenue this year.
“The approval of the tax amnesty law means that growth risks are now more evenly balanced, rather than skewed to the downside relative to our base case forecast of 5.0 percent for 2016 and 5.2 percent year on year for 2017,” multinational financial services corporation Morgan Stanley wrote in a research note last week.
The government has set a target of 5.2 percent GDP growth in the 2016 revised state budget.
While noting some revenue and spending targets are too ambitious, Morgan Stanley predicted the government is likely to see revenue rise 8.5 percent on last year with the tax amnesty program, with expenditure growth predicted to come in at 8.6 percent. This will bring the 2016 fiscal deficit to2.6 percent of GDP, the same as last year.
Government spending is tipped at Rp 2,082 trillion in the revised budget, up 15 percent from last year. Revenue is pegged at Rp 1,784 trillion, up 19 percent from last year.
A deficit of Rp 297 trillion, or 2.35 percent of GDP, is expected and has been met with plans to sell additional bonds to bridge the gap.
Morgan Stanley said asset repatriation would help finance part of the deficit.
“Assuming an overseas asset base of $200 billion, if 60 percent of these assets are declared and 30 percent of the declared assets are repatriated, we estimate that the asset repatriation could amount to about 4 percent of GDP,” Morgan Stanley said.
sumber : Jakartaglobe
Kategori:Tax Amnesty in English