(Bloomberg) -- Indonesia’s tax amnesty is being held back by a limited choice of investment options available to individuals and companies when repatriating funds, National Development Planning Minister Bambang Brodjonegoro said.
While the government remains upbeat about the plan, which runs until March, Brodjonegoro said that some of the largest evaders were yet to participate.
“Clearly, the so-called big taxpayers -- which are quite many, many in terms of number, maybe hundreds or more -- they are not participating yet in the tax amnesty,” he said in an interview Friday in Sydney. “They prefer to wait and see.”
The amnesty plan has been a flagship policy of President Joko Widodo, with the government hoping it will add as much as 165 trillion rupiah ($12.6 billion) to revenue, helping to ease pressure on the budget as the deficit heads toward the mandated ceiling of 3 percent of gross domestic product. Inflows from the tax amnesty have reached about 4.6 percent of the government’s revenue target as of Friday.
“Our weakness is the financial instruments are limited,” Brodjonegoro said. “At least with our, I think, good tariff for the tax amnesty, we hope that they can still give some capital inflows into Indonesia.”
Those participating in the amnesty can invest in assets including government and SOE bonds, local infrastructure projects approved by the government, gold and state-regulated property investment trusts. Repatriated funds must stay onshore for a minimum three years.
Brodjonegoro, 49, was shifted from the post of finance minister in July and replaced by Sri Mulyani Indrawati, a former managing director at the World Bank who is tasked with overseeing the tax amnesty plan.
Growth in Southeast Asia’s largest economy has come under pressure since last year amid falling commodity prices and weaker consumer demand. Falling revenue has prompted the government to cut back on spending, undermining the outlook further. The central bank estimates growth will be closer to the lower end of its 4.9 percent to 5.3 percent target this year, compared with 4.8 percent in 2015.
Brodjonegoro said global uncertainty and weak demand was “still haunting” Indonesia, adding that achieving growth of more than 6 percent would require boosting the rate of investment to at least 10 percent from 5 percent to 6 percent currently.
“If you look at the consumption, then we have been able to maintain the inflation -- so household consumption is stable,” he said. “So the key is the investment. So far, the investment growth is still under-performing.”