Indonesia May Be Closer to Ratings Upgrade after Tax Amnesty Windfall

Indonesian President Joko Widodo speaking about the tax amnesty program on Feb 28. The latest Tax Amnesty Program held in Indonesia was called as one of the most successful repatriation programs in the world.

Jakarta, 06 Rajab 1438/03 April 2017 (MINA) – After netting more than US$10 billion (S$13.9 billion) in revenue from its tax amnesty program, Indonesia may be a step closer to winning a much-coveted investment grade from S&P Global Ratings.

The nine-month amnesty drive, which ended on Friday, led citizens to declare 4,866 trillion rupiah (S$509.6 billion) of assets hidden from tax authorities, straitstimes.com reported on Monday.

The success may help Southeast Asia’s largest economy win an upgrade from S&P, according to Oversea-Chinese Banking Corp. and DBS Group Holdings.

President Joko Widodo has been pushing for an upgrade from S&P, the only main credit-rating company still keeping Indonesia at junk status.

An investment grade would boost the country’s appeal among conservative Japanese institutional investors, potentially boosting inflows by US$3 billion to US$5 billion over the next year, Goldman Sachs Group Inc. estimated in March.

“It’s imminent that Indonesia gets back to investment grade rating,” said Gundy Cahyadi, an economist at DBS in Singapore. “There has been significant improvement made on all fronts.

The broadening of the tax base is going to be a plus in terms of how we look at the overall fiscal standing.” Richard Noonan, a spokesman for S&P, declined to comment on the tax amnesty. The company in January said it may upgrade Indonesia to investment grade in 2017 or 2018 if the country delivered better spending, ensured that deficits were on a declining trend, and moderated government debt.

The amnesty program was a key plank in Widodo’s push to boost revenue needed to fund ambitious spending plans as the country struggles to return to historic levels of economic growth.

The government cut spending last year to meet a legal cap on its fiscal deficit and rebuilt foreign exchange reserves to a five-year high of almost US$120 billion. (T/RS5/RS1)

Mi’raj Islamic News Agency (MINA)