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Jakarta Post

Govt policy changes again

Doing business in Indonesia often means being prepared for policy dynamics in which drastic changes or contradictions may occur over a short period of time

Grace D. Amianti (The Jakarta Post)
Jakarta
Mon, July 4, 2016

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Govt policy changes again

Doing business in Indonesia often means being prepared for policy dynamics in which drastic changes or contradictions may occur over a short period of time.

The government has several times issued and retracted rules to the dismay of businesses and consumers. Cases in point included plans to impose a 10 percent value-added tax (VAT) on toll road users and livestock and imposing a tax on gemstone purchases.

Some of the plans saw the ensuing issuance of a Finance Ministry regulation, only to be retracted or canceled in a number of days. Though lamented by many, such flip-flopping policy has continued and stirs doubts over the government’s thorough policy-making decisions.

The latest case involves the postponement of a ministerial regulation that allows the Directorate General of Taxation to peep into credit card transactions.

After being implemented on May 31, the government decided last Friday to put the practice on hold until March 2017. It claims that it wants to prioritize tax amnesty implementation to improve tax revenues, thus putting credit card transactions on the back burner.

“We want to calm down bank customers, so that we can be more intensive in reviewing credit card transaction data after the tax amnesty is over,” Finance Minister Bambang Brodjonegoro said last week.

Bambang rejected the notion that the delay occurred because of objections from the credit card industry.

Tax office spokesman Hestu Yoga Saksama acknowledged that the credit card rule was introduced because it was initially skeptical of whether the tax amnesty bill would be passed into law.

Yoga did not provide details on the fate of the policy after March. Meanwhile, credit card issuers said they were relieved upon learning about the postponement.

“This is what we want. We told the regulator that we would obey the rule, but we needed solutions because of the negative impacts that followed,” Indonesian Credit Card Association (AKKI) general manager Steve Marta said on Friday.

He said when news of the policy broke several months ago, some customers became concerned about the privacy of their data, prompting them to close their accounts, while several others cut back on spending.

Bank Indonesia (BI) data shows the total volume of credit card transactions fell to 23.68 million in April from 25.84 million in March, while transaction value dropped to Rp 22.15 trillion in April from Rp 24.77 trillion in March.

“We usually see low transactions in April, but the decline was especially significant last April compared to previous years,” Steve said.

The association, with membership comprising 22 banks and one financial services firm, acknowledged that the figures had recovered in May, but said it needed time to assess the sustainability and whether it was a one-off rise in preparation for the Idul Fitri holiday.

Banking executives said they would wait for a formal postponement notification from the tax office before officially revising their business outlook, but agreed that the postponement was a blessing in disguise.

Bank Mega credit card and personal loan director Dodit Wiweko Probojakti said the lender welcomed the postponement, as it boosted its confidence to increase transactions in the second half.

Bank Mandiri’s consumer loans group senior vice president, Harry Gale, said it was conducting further calculations on the business, but said that the postponement would probably not generate significant growth in the near future.

In addition to postponing the rule, the tax office also announced it was assessing another policy that would allow certain components in credit card transactions to be used as deductions in their income tax (PPh) calculations.

It argued that the policy would help support “less cash” transactions, making it a habit among consumers to avoid paying with cash.

To the AKKI, however, it remains to be seen how the tax incentive will play out in reality. “There is the same incentive offered abroad to spur higher electronic transactions, but we don’t know yet in detail what the government seeks to offer us,” Steve said.

Prima Wirayani contributed to this story.

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