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tate-owned banks expect increases in their capital adequacy ratio (CAR) if the government approves a tax-incentive plan for companies that conduct revaluation on fixed assets, say the lenders'€™ executives.

The planned incentive, which is proposed by the Finance Ministry'€™s Tax Office, would offer tax cuts on fixed assets '€” comprising building and land properties '€” for companies, including banks, which could increase their capital based on recalculation of their book values.

According to the plan, the current rate assets tax of 10 percent is proposed to be lowered to 3 percent.

Bank Rakyat Indonesia (BRI) finance director Haru Koesmahargyo said the tax incentive would attract state banks to conducting asset revaluation, as they could pay lower taxes owing to higher value of their fixed assets.

'€œIt will have a positive effect on banks'€™ CAR. As for BRI, our CAR will increase to 21 percent from 20 percent if we conduct asset revaluation,'€ Haru told reporters after a forum held by the State-Owned Enterprise (SOE) Ministry on Wednesday.

Haru said BRI had Rp 2 trillion (US$146.3 million) in fixed assets, which could increase to Rp 8 trillion if the bank conducted asset revaluation, with a remaining Rp 6 trillion to be charged for assets tax.

BRI would only pay Rp 18 billion in assets tax if the government cut the rate to 3 percent, Haru said, adding that '€œhigher CAR will help banks reduce their debt-to-equity [DER] ratio, so they will have more space to disburse loans.'€

Meanwhile, Bank Mandiri corporate secretary Rohan Hafas said state banks were delaying their asset revaluation as they awaited the proposed tax incentive to help increase their capital.

'€œWe'€™ve been waiting for the incentive for a long time. Mandiri'€™s current fixed asset valuation hasn'€™t been appraised since 1990,'€ Rohan said, adding that the bank'€™s CAR could rise to 20 percent from currently 17.63 percent if the incentive was given.

Bank Negara Indonesia (BNI) finance director Rico Rizal Budidarmo voiced a similar opinion, saying that the proposed tax incentive would help the lender strengthen its financial fundamental, even though it had yet to calculate the impact to its CAR.

Separately, director general for taxation Sigit Priadi Pramudito said his office had proposed offering a gradual tax incentive for fixed assets by cutting the rate to 3 percent this year and 4 percent next year, and then return to a general rate by 2017.

To increase state firms'€™ capacity, SOE Minister Rini Soemarno said that the ministry would thoroughly calculate the plan to revaluate assets of the country'€™s 199 SOEs, which owned total assets of Rp 4.2 quadrillion, adding that '€œthe revaluation is expected to not be a burden for state companies.'€

The plan to revaluate state companies'€™ assets has been delayed multiple times since the administration of president Susilo Bambang Yudhoyono on account of the high asset tax rate.

Rini said the ministry had also proposed switching fixed assets tax for SOEs to state capital injection (PMN) so that they would be exempt from paying asset tax and increase their dividends instead.

The House of Representatives approved state injections of Rp 34.3 trillion for 23 SOEs, lower than the proposed Rp 39.4 trillion for 25 companies.