[JAKARTA] Indonesia's flagship tax amnesty programme will likely yield only a fraction of what was targeted, the central bank governor said, in a blow to the government's plan to meet its budget deficit target.
Indonesia launched the nine-month tax amnesty programme in July, offering low penalty rates for taxpayers who declare untaxed assets at home and abroad by March 2017.
But the programme has started more slowly than expected, raising doubts over whether it will generate enough revenue to keep the deficit within target.
And the shortfalls could make it harder for President Joko Widodo's government to fund its ambitious infrastructure projects.
The government had banked on the amnesty bringing in 165 trillion rupiah (S$17 billion) in 2016, to help keep the budget deficit from breaching its legal limit of 3 per cent of GDP.
Indonesia's new Finance Minister Sri Mulyani Indrawati had estimated last month that the deficit would be 2.5 per cent for 2016.
But Bank Indonesia Governor Agus Martowardojo told a parliamentary hearing late Wednesday that the central bank's baseline model for the amnesty programme points to merely 18 trillion rupiah of revenue in 2016 - only 11 per cent of target - and an additional 3 trillion rupiah in 2017.
Assets repatriated home under the amnesty would probably amount to just US$13.8 billion, he said.
"We're being conservative about our outlook based on the latest development of the tax amnesty," Mr Martowardojo said, citing that 1-1/2 months after its launch, the government's amnesty revenue was less than 4 per cent of target.
The central bank was more optimistic back in April, when Mr Martowardojo said the amnesty would attract home about US$42 billion.
The Finance Ministry had been even more bullish, projecting US$76.5 billion would be repatriated thanks to the programme.
Finance Minister Indrawati, who attended the parliamentary hearing, declined to comment on the central bank's revised forecast.
The ministry's tax office, which runs the amnesty programme, said afterwards that its revenue target was unchanged.
"We hope it can be achieved. We will never be satisfied," Ken Dwijugiasteadi, the director general for taxes at the finance ministry, told Reuters.
Jakarta's stock index was largely unchanged on the news in early Thursday trading.
Since the launch of the amnesty programme, the index has rallied more than 10 per cent, supported by the prospect of more money coming home to South-east Asia's largest economy.
Some companies have also prepared to increase their bond sales this year to absorb returning funds, while property firms have tailored their marketing to specifically target amnesty participants.