Indonesia has agreed to a crucial proposal discussed among G20 nations to impose tax on financial transactions, to be spent on bailing out financial institutions during crises, an official said Tuesday.
The proposal, initiated by developed nations led by the US, is based on the idea that financial institutions, banks and non-banks, cover their own losses - as usually the government has to spend taxpayers' money on bailing out banks in a financial crisis.
"Basically we agree. All participants have received it," said the Finance Ministry's inspector general Hekinus Manao, who attended last week's G20 meeting in Busan, South Korea.
"This is a very debated topic," he said.
Hekinus, who represents Indonesia in two working groups for the G20 meetings, added the G20 nations had yet to settle on the implementation of the proposal, which would be discussed in another G20 meeting in Toronto later this month.
"We don't know how much the tax would be or which agency would collect it. Despite its internal problems, we already have the Deposit Insurance Corporation *LPS* as a designated body for that, but we are unsure if they will be responsible for this," he said.
The LPS has been criticized by lawmakers for spending Rp 6.76 trillion (US$716 million) in the bailout of Bank Century (now Bank Mutiara).
Lawmakers said the money spent came from taxpayers.
Hekinus argued the money came from the premium collected from depositors, which was meant to be spent to save the banking sector.
Bank Negara Indonesia economist A. Tony Prasetiantono, said the proposal was "a good idea but had limitations".
"It's similar to the LPS. If anything happens, the money can be spent. The problem is, if the failed bank is the size of Century, with a Rp 6.76 trillion bailout, it can be paid, but if it's like the 1998 *banking* crisis, when all banks failed, it's not affordable," he said.
Hekinus also said that Indonesia expected to see a fiscal consolidation of European nations in fear their high budget deficit and high debt-to-GDP ratio might impact emerging economies.
"We really fear a reversal of funds from emerging nations," he said.
Other topics that will be discussed in the G20 meeting in Toronto include strengthening the banking sector in terms of capital and transparency and implementing the international accounting standard by financial institutions.
"We don't have the infrastructure *to implement the international standard*. It will take time," he said.
Hekinus also said that Indonesia and South Korea had pushed for standby loans under the International Monetary Fund (IMF), but there would be funds allocated based on a group of countries in an attempt to reduce the negative stigma attached to a country helped by the IMF.
"This stigma problem is the perception that a country is in a mess if it receives IMF funds," he said.
He added that emerging nations would also strive to raise their voting power in the World Bank and IMF, citing the current problem of linking voting power based on the amount of money contributed by member countries.
In a June 3 letter released on Saturday as a G20 gathering of finance ministers and central bankers got underway, US Treasury Secretary Timothy Geithner urged the G20 ministers and central bankers to accelerate progress on financial reforms, including a new framework for bank capital requirements, Reuters reported.
He also mentioned the controversial issue of bank levies, saying that the G20 needs to move forward on the "emerging framework" for managing the failure of large global financial institutions, including "principles for how to cover the financial costs of financial crises."
| 
|
|
|
|
|
|
|