JAKARTA • Indonesia's flagship tax amnesty programme will likely yield only a fraction of the revenue targeted, the central bank governor said, in a blow to the government's plan to meet its budget deficit target.
Indonesia launched the amnesty programme in July, offering low penalty rates for taxpayers declaring untaxed assets at home and abroad by March next year. But the programme has started more slowly than expected, raising doubts over whether it will generate enough revenue to meet the deficit target.
And the shortfalls could make it harder for President Joko Widodo's government to fund ambitious infrastructure projects.
The government had banked on the amnesty to bring in 165 trillion rupiah (S$17 billion) this year, to help keep the budget deficit from breaching a legal limit of 3 per cent of GDP. Finance Minister Sri Mulyani Indrawati estimated last month that the deficit this year would be 2.5 per cent.
But Bank Indonesia Governor Agus Martowardojo told a parliamentary hearing late on Wednesday that the central bank's baseline model for the programme points to merely 18 trillion rupiah of revenue this year - only 11 per cent of the target - and 3 trillion rupiah more next year. Assets repatriated home under the amnesty would probably amount to just US$13.8 billion (S$18.6 billion), he said.
In April, before Parliament approved the amnesty, the governor predicted it would attract home about US$42 billion.
The government had banked on the amnesty to bring in 165 trillion rupiah (S$17 billion) this year, to help keep the budget deficit from breaching a legal limit of 3 per cent of GDP.
On Wednesday night, Mr Martowardojo told Parliament "we're being conservative about our outlook". He noted that 11/2 months after its launch, the amnesty revenue was less than 4 per cent of the target.
Ms Indrawati, who attended the parliamentary hearing, declined comment on the central bank's revised forecast.
The ministry's tax office, which runs the amnesty programme, said its revenue target was unchanged. Mr Hestu Yoga Saksama, a tax office spokesman, said there were no plans yet to extend the deadline or change amnesty tariffs.
The tax office hopes that more Indonesians will follow the footsteps of billionaire James Riady, who last week announced his participation in the amnesty. Mr Riady, chief executive of Indonesian property-to-media conglomerate Lippo Group, did not disclose the value he declared.
Anticipation of large inflows has aided some Indonesian shares this year, and property firms have tailored their marketing to target amnesty participants.
Several wealth managers and analysts said potential participants are still seeking to understand the amnesty's terms and options as well as its attractiveness for them.
Taxpayers with assets abroad have an option to leave them there, and pay a higher penalty than if the money comes home.
"People are seeing this as an opportunity (to declare wealth), but they have a lot of questions," said Mr Winston Sual, president director of Jakarta-based Panin Asset Management, which manages 11 trillion rupiah in funds.
He said participation rates could rise later.