The government will attempt to channel funds repatriated through the tax amnesty program to be invested in the real sector. The provision is regulated under recently issued Finance Minister Regulation No. 122/2016 (Regulation).
Article 6 of the Regulation states that funds transferred from gateways or designated receiving banks can be invested in several instruments. One is infrastructure investment through a public-private partnership scheme, and another is investment in the real sector based on priority projects determined by the government.
(Also read: Finance Minister Issues Technical Regulation on Fund Repatriation to the Real Sectors)
The third investment instrument is investment in land and/or buildings, and the fourth is investment in gold bar. Another is direct investment in a domestic company. “And other forms of investments outside the official money market in accordance with statutory provisions,” the Regulation states as quoted Wednesday (10/8).
Investment in gold bars is regulated under Article 11 of the Regulation, which says that the gold bars must originate from Indonesia and have Indonesian National Standard or London Bullion Market Association (LBMA) accreditation.
Taxpayers or tax amnesty participants can use the gold bars or land they have invested in as collateral to obtain loans from the designated gateway banks. “Loan facilities will be approved in accordance with the regulations of each gateway bank,” the Regulation stipulates.
The Regulation also says that the investment must be for three years, starting from the time the repatriated funds are transferred to a special account provided by the receiving bank. In addition, investments can only be made in Indonesia, through sales and purchase transactions and commercial activities.
(Read: Tough Discussions on Tax Amnesty Fund Scheme Faces)
The Regulation goes on to say that taxpayers are not allowed to revoke their power of attorney from bank they appoint as receiving bank during the three year period. However, funds originating from divestment, sales, or transfer of ownership can be diverted to other gateway banks.
“Receiving banks designated as tax amnesty fund gateways cannot be sued by taxpayers should there be any investment dispute between the taxpayer and other parties, unless the receiving bank is proven to abused its authority,” Article 10 of the Regulation states.
Regarding the conversion of repatriated funds, President Joko “Jokowi” Widodo said that the government had prepared short-term, medium-term, and long-term investment instruments. Short-term investments includes tate securities, state bonds, sharia bonds, and state-owned enterprise bonds.
Medium and long-term investments focus on infrastructure development, including ports, toll roads, public transport, airport construction, and power plant construction.
(Read: Government Promises Profits for Repatriating Funds to Indonesia)
Infrastructure development is one of way of boosting Indonesia’s competitiveness. “This is a necessity if we want to compete. If we are not ready, don’t expect to compete. Vietnam is way ahead of us. We need to catch up,” Jokowi said.
In addition to investment instruments provided by the government, tax amnesty participants can also invest in the labour-intensive automotive, garment, or textile sectors. “If someone wants to construct a labour-intensive factory, go ahead. Provide them with the opportunities, help them with the permits; don’t make it difficult,” Jokowi said at a tax amnesty information event in Semarang, Central Java, Tuesday (9/8).