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Jakarta Post

Tax amnesty inflows to stoke inflation at turn of year: BPS

  • Anton Hermansyah
    Anton Hermansyah

    The Jakarta Post

Jakarta   /   Fri, July 8, 2016   /  02:41 pm
Tax amnesty inflows to stoke inflation at turn of year: BPS The Central Statistics Agency (BPS) expects the tax amnesty program to help increase banking liquidity, which could prompt banks to lower their interest rates. (tribunnews.com/-)

The Central Statistics Agency (BPS) expects the tax amnesty program to increase banking liquidity, which could prompt banks to lower their interest rates and ultimately affect inflation.

Amid the potential increased liquidity brought about by repatriated assets, people will be eager to take out loans either for investment or, especially, consumption. The effect of increased consumption might be seen in December at the earliest, BPS deputy Sasmito Hadi Wibowo told The Jakarta Post in Jakarta recently.

"If the tax amnesty is successful in boosting consumption, it will result in higher inflation, but probably only in December or January [next year]. We will see low inflation in September and October," he said.

The drivers of consumption, he elaborated, were middle to upper income consumers who statistically had reduced their savings to maintain their consumption level in the first four months of the year.

Based on data from the Indonesian Deposit Insurance Corporation (LPS) for January to April, savings valued at Rp 200 million (US$15,000) to Rp 1 billion were down by an average 0.6 percent, while those between Rp 1 billion to Rp 2 billion decreased by 1.26 percent. Savings of people holding Rp 2 billion to Rp 5 billion also declined by 1.28 percent.

"Indonesians currently are a saving-oriented society. However, the tax amnesty effect will be mixed for different classes," Sasmito said.

Differences in consumption patterns could be seen in motorcycle and car sales in May. Motorcycle sales, which are an indicator of spending by middle-to-low income earners, dropped 6 percent year-to date, while car sales, representing middle-to-high earners’ consumption, declined only 2.3 percent. (ags)

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