JAKARTA (BLOOMBERG) - Indonesia's government is considering lowering a tax on income generated by all its bonds as it seeks to reduce local borrowing costs, a Finance Ministry official said.

The plan may take effect as early as next year and will cover debt denominated in rupiah and foreign currencies, according to Scenaider Siahaan, director of strategy and portfolio at the ministry's budget financing and risk management office.

This follows a move in June to effectively scrap a withholding tax on interest payments on its global bonds by absorbing the levy. Indonesian yields are the highest among major Southeast Asian issuers.

"The review has been discussed with related units at the ministry and we're preparing to submit it immediately to the finance minister," Siahaan said by text message on Wednesday. The official had said in May that lowering taxes on bonds would help local companies reduce borrowing costs.

The moves are in line with President Joko Widodo's repeated calls for interest rates to "fall, fall, fall, fall and keep falling" to help boost economic growth. Finance Minister Sri Mulyani Indrawati will review the proposal to cut the tax, currently set at 15 per cent for local investors and 20 per cent for foreigners, and the government would need to get parliamentary approval to lower the rate to zero, or scrap it entirely, according to Siahaan.

Indonesia's 10-year government notes yield 6.88 per cent, compared with 3.52 per cent for Malaysian bonds and 2.22 per cent on Thailand's debt, according to data compiled by Bloomberg.