Home News Indonesia prepares further measures to stabilize markets, stop tax payments in the presence of virus risks – Business

Indonesia prepares further measures to stabilize markets, stop tax payments in the presence of virus risks – Business

by drbyos

Indonesia is preparing measures similar to those taken during the 2008 global financial crisis, including the repurchase of government bonds and the shutdown of income taxes, to restore confidence in the financial markets and mitigate the economic impacts of COVID- 19.

Financial authorities will oversee the bond market to follow its core value, Finance Minister Sri Mulyani Indrawati said Tuesday, adding that current circumstances have led to irrational market behavior.

“We created a framework for bond stabilization to calm the market while Bank Indonesia also bought government bonds in the secondary market,” Sri Mulyani told reporters. “This will prevent excessive profit taking and speculation during this unusual situation.”

Sri Mulyani said that the recent dip in global markets following the slump in oil prices following a disagreement between the oil giants of Saudi Arabia and Russia and the heightened fears of COVID-19 has been extraordinary. Therefore, the government will move to prevent these sentiments from damaging Indonesia’s economy, he added.

“Our monetary and tax authorities are working together, just like in 2008, to restore market confidence and rationality,” said Sri Mulyani.

Read also: Indonesia is developing the second stimulus package to support trade amid fears of viruses

In February, foreign investors sold 33.6 trillion Rp (2.36 billion US dollars) in Indonesian equities and bonds, while 5 trillion dollars were wiped out by equity markets around the world.

The Jakarta Composite Index (JCI) plunged 6.58 percent on Monday and ended the day at 5,136.81 points, the lowest level since December 2016. It lost 18.46 percent of its value since the beginning of the year.

The Financial Services Authority (OJK) allowed listed companies to repurchase their shares of up to 20 percent of the paid-up capital without a previous shareholder meeting in an attempt to facilitate market volatility.

“This is like an effort to stimulate the economy and reduce the significantly fluctuating market impact,” OJK said in a statement released after Monday’s trading session closed in red.

Read also: Another stimulus package prepared for the manufacturing industry while coronavirus is spreading

Sri Mulyani said the government also plans to delay the collection of personal and corporate income taxes to stimulate the economy.

“Based on our experience in 2008, we have prepared a mechanism for the individual [and corporate] income tax, including how long it will be effective and for which sectors. “

The International Monetary Fund called on governments around the world on Monday to join forces and launch aggressive financial support for the global economy infected with the coronavirus, including direct payments to workers and businesses.

Given the “acute shocks” caused to economies, consumers and businesses, IMF chief economist Gita Gopinath said that “policy makers will need to implement substantive targeted measures in the fiscal, monetary and financial markets to help families and businesses affected. “

Measures could include “money transfers, wage subsidies and tax reliefs”, as well as interest rate cuts and financial market support from central banks, he added.

The IMF warned that the impact of the COVID-19 epidemic would slow the growth of the world economy below 2.9 percent last year.

IMF chief Kristalina Georgieva said last week that the epidemic “is no longer a regional problem, it is a global problem that requires a global response.”

The government announced Tuesday that at least 27 people had tested positive for the COVID-19 test in Indonesia. The virus has shut down factories, stopped traveling, delayed conferences and sporting events and infected over 114,000 people worldwide. More than 4,000 people have died.

The government also announced a 10.3 trillion Rp tax stimulus package to combat the economic impact of the epidemic. A second incentive package includes simpler import procedures and higher tax breaks to support the manufacturing industry and trade already in the pipeline.

David Sumual, chief economist of Bank Central Asia (BCA), said that fiscal measures are “more important” than monetary measures taken by the central bank to combat the effects of the virus.

“The plan to delay corporate income tax collection will offer businesses the flexibility to deal with coronavirus,” said David The Jakarta Post during a telephone interview. “But we need more tax incentives to maintain customers’ purchasing power.”

David said the government should opt to raise the non-taxable income threshold, similar to a move made in 2008, to increase consumer spending, adding that the central bank’s decision to lower reserve ratios was “more effective for banks that lower interest rates. “

“Although it is not used directly to provide loans, the money could be used to purchase government bonds to help stimulate the weakening of tax conditions.”


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