The Law No. 11 Year 2016 on Tax Amnesty issued on June 29 is effective July this year right after Eid al-Fitr until March next year. The law aims to increase tax revenue as well as to promote tax reform by giving delinquent tax payers an opportunity to redeem their assets. It is expected that in the near future, as assets are freed, inflows of repatriated funds will inundate Indonesia’s economy. The Indonesia Stock Exchange (IDX) has prepared and market has expected that there are sectors which benefit from this scheme. Who are they?
While some people deem the government to be too optimistic by setting a tax revenue target of Rp 165 trillion from this law alone (Read more: Government Is Too Optimistic About Tax Amnesty), IDX still sees a possibility and an opportunity.
IDX has prepared private equity fund (RDPT), IPO stocks, and equities amid secondary market as containers. (Read more: Is IDX Ready to Manage Repatriation Funds from Tax Amnesty?) Moreover, IDX has given incentives in terms of discounted stock crossing transaction fee and simplification of tender offer requirement with regards to repatriated funds (Read more: Speeding up Repatriation, IDX Gives Crossing and Tender Offer Incentives).
Banking sector is the most profitable. Firstly, it is because liquidity will increase and will then reduce cost of fund. Secondly, it is because 7 banks have been designated to collect repatriated fund from tax amnesty policy. Those banks will have additional fee-based income and liquidity which can be distributed as credit hence becoming positive catalyst for their stock price movement. (Read more Collect Banks Shares that are Eligible to Receive Repatriation Fund.)
Non-banking financial sector will also benefit with appointment of 19 Securities and 18 Investment Managers to Manage Repatriated Funds. These companies will boost their transaction liquidity and revenues.
In addition, property and infrastructure sectors are sectors which are worth looking into (Read more: Investors Wait for Good Performance in the Second Quarter). Specifically, PT Bumi Serpong Damai Tbk (BSDE), PT Ciputra Surya Tbk (CTRS), PT Ciputra Properti Tbk (CTRP) and property contractors, namely, PT Total Bangun Persada Tbk (TOTL) will become investors’ choices (Read: Tax Amnesty Law Completion, a Catalyst for JCI?).
Four stocks from SOE which will hold rights issue are also predicted to absorb funding from repatriation. This was predicted by SOE Ministry which said that the remaining funds worth Rp 5.3 trillion will be absorbed by the public by using some of the projected Rp 165 trillion worth of funds resulted from tax amnesty (Read more: Proceeds of New Shares Offering by 4 SOEs Will be From Tax Amnesty).
The last sector to gain benefits is the consumer. It is because repatriated fund inflow will lift the consumer’s purchasing power (Read more: Tax Amnesty Benefits Consumer and Banking Sector).
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