The obligatory tax amnesty redemption rate may burden the people's finances, which will prompt them to save their money.
Sri Mulyani
Arief Kamaludin | Katadata

Finance Minister Sri Mulyani said that although tax amnesty policy is beneficial for increasing the state revenue, we must remain watchful of the negative effects the program may have on this year's economic growth.

Sri said that she will be cautious in running the tax amnesty program out of concern of the public's view. The obligatory tax amnesty redemption rate may burden the people's finances, which will prompt them to save their money.

This condition can lead to lower household consumption rate, an important component in economic growth, in the second half of the year.

Advertisement

"I have to be careful because of the public sentiment on the consumption side," Sri said during a working meeting with the House of Representatives' (DPR) Finance Commission (Commission XI) at the MPR-DPR building, Jakarta, Thursday night (25/8).

(Read: Mandatory Wealth Report; Tax Amnesty Sparks Public Concern)

On the other hand, Sri believes that the tax amnesty program will bring positive impacts to the economic growth. She said that funds repatriated by the program can be a source of new investments if it’s well managed.

After all, the government's budget is limited and not big enough to spur investments. "Although it will not happen immediately, tax amnesty will create investments," she said.

To note, the second quarter economic growth was 5.18 percent.Throughout the first half, the growth rate was 5.04 percent. The main supporter of quarter two's growth was the increase in public consumption and a surge in government spending.

(Read: Budget Cut Causes BI to Lower Growth Outlook)

However, Bank Indonesia (BI) last week lowered its economic growth projection for 2016 from 5.0-5.4 percent to 4.9-5.3 percent. The correction was based on the government's decision to cut expenditure budgets, which would slow the economy in the second half. In the 2016 Revised State Budget, the government is targeting the economy to grow 5.2percent.

According to Sri, participants of the tax amnesty program are mostly individual taxpayers, of which 31 percent own small and medium businesses (SMEs). The remaining 22.9 percent of the participants are corporate taxpayers, of which seven percent are SMEs.

To date, the state has received IDR 1.45 trillion of retribution from the tax amnesty program. "We believe we will have more participants in September," she said.

(Read: Q2 Economic Growth Supported by Gov't Spending and Consumption)

From the technical side, Sri said her ministry is improving a number of services for the tax amnesty program. The Tax Directorate is overwhelmed with the promotion activities; only managing to take 68 percent of the phone calls that they received, among others.

"We are improving the call service by adding telephone network from Telkom,and increasing the number of service points from 341 to 588," she said. According to Sri, many taxpayers are asking about the redemption rate, the property value fairness, and specific conditions that are applied to certain groups of taxpayers such as pensioners.