Indonesia Government Considers Easing Taxes

The Indonesian government is considering tax incentives for businesses to convert their dollar holdings into rupiah among measures to support its currency, the Straits Times reports, citing an unidentified government source.

The government has introduced a number of measures to ease pressure on the rupiah, which has dropped 8.4% this year, making it the worst performer in Asia after the Indian rupee. Finance Minister Mulyani Indrawati said on Friday a team was discussing options for managing exporters’ foreign-exchange earnings, Bloomberg reported.

The ministry is also reviewing a tax policy implemented on government bonds to address rising yields, and may simplify the tax treatment on sovereign paper, according to Suahasil Nazara, head of the fiscal policy office at the finance ministry.

Indonesia’s rupiah, stocks and bonds have suffered along with other emerging-markets assets as US interest rates are becoming normalized and concerns about contagion rattle investors’ confidence. The pressure intensified after the central bank said the current account deficit widened to 3% in the second quarter from 2.2% in the previous three month.

Indonesia’s upcoming election will be fought on the economy and jobs with the country’s ailing currency set to be a key issue, according to vice-presidential candidate Sandiaga Uno said in his first interview with foreign media since joining the race.

As Indonesia gears up for a long presidential campaign that begins on Sunday, the main opposition has outlined a platform that includes a shake-up of labor laws and measures aimed at boosting domestic and foreign investment. Uno, the running mate to former general Prabowo Subianto, said the government of President Joko Widodo had been too slow to respond to pressures on the rupiah stemming from a predictable rise in US interest rates.

The currency has tumbled almost 9% against the dollar this year to levels not seen since the Asian financial crisis two decades ago amid a rout in emerging markets globally, with Indonesia targeted because of its current-account deficit and reliance on foreign investor inflows.