April 17, 2020 / 7:09 AM / 3 months ago

UPDATE 1-Indonesia to expand tax breaks to more sectors to prevent 'bankruptcies'

* Indonesia economy faces a “huge shock” due to global recession

* Mining, plantation among 11 sectors to be given tax breaks (Adds comments from minister, details)

By Gayatri Suroyo and Tabita Diela

JAKARTA, April 17 (Reuters) - Indonesia will expand tax incentives it currently gives to some manufacturing industries to cover 11 more sectors to prevent “massive bankruptcy” due to the impact of the coronavirus pandemic, officials said on Friday.

Governments around the world have provided stimulus measures to alleviate the threat to their economies from the widespread travel curbs and shutdowns of schools and businesses that have been triggered by the rapid spread of the novel coronavirus.

Finance Minister Sri Mulyani Indrawati said Indonesia’s economy faces a “huge shock” due to an expected global recession, in addition to the hit it will take from the restrictions on people’s mobility that will hurt domestic demand for products, services and fuels.

“The state budget will try to provide support so that the shock does not disrupt or does not cause massive bankruptcy,” Indrawati told an online news conference.

Southeast Asia’s largest economy may face a recession due to the virus outbreak, but the government is still assuming 2020 GDP growth of 2.3% as its baseline scenario, Indrawati said.

The tax incentives Indonesia currently gives to some manufacturing industries will be extended to sectors such as food, trade, telecommunication, forestry, logistics, construction, tourism, transportation and renewable energy, the finance ministry’s tax chief, Suryo Utomo, said.

Sectors that are affected by depressed global prices such as plantations, mineral and coal mining, and oil and gas will also be included, Utomo said.

The incentives to be expanded include the temporary waiving of income tax on salaries for some employees, discounts on corporate tax instalments and the suspension of import taxes, he said.

Based on government tax revenues in the first quarter, corporate profits are already under pressure. Income tax payments from non-oil and gas firms in January-March were down 3% to 137.5 trillion rupiah ($8.88 billion), while contributions from oil and gas companies plunged 29% to 10.3 trillion rupiah.

Indrawati warned that the figures have yet to reflect the severity of the impact of the outbreak, which she said she expected to lead to a contraction in state revenues this year.

The government’s latest estimate for its 2020 budget deficit was 5.07% of GDP. The deficit in January-March was 76.4 trillion rupiah, or 0.5% of GDP.

Indonesia reported 5,516 confirmed coronavirus cases as of Thursday, with 496 deaths. Authorities expect cases to peak between May and June with around 95,000 infections.

($1 = 15,480.0000 rupiah)

Reporting by Tabita Diela and Gayatri Suroyo; Editing by Tom Hogue

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