Global Action

Indonesia agrees to G20 proposal to tax financial transactions

(Xinhua)
Updated: 2010-06-09 19:00

JAKARTA - Indonesia has supported a crucial proposal discussed among G20 nations to impose tax on financial transactions, to be spent on bailing out financial institutions during crises, local media reported here Wednesday.

The plan, initiated by developed nations led by the United States, is based on the idea that financial institutions, banks and non-banks, cover their own losses, as usually the government has to spend taxpayers' money on bailing out banks in a financial crisis.

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"Basically we agree. All participants have received it," said the Finance Ministry's inspector general Hekinus Manao, who attended last week's G20 meeting in Busan, South Korea.

The official quoted by the Jakarta Post as saying that the G20 nations had yet to settle on the implementation of the proposal, which would be discussed in another G20 meeting in Toronto later this month.

"We don't know how much the tax would be or which agency would collect it. Despite its internal problems, we already have the Deposit Insurance Corporation "LPS" as a designated body for that, but we are unsure if they will be responsible for this," he said.

The LPS has been criticized by lawmakers for spending 6.76 trillion rupiah ($716 million) in the bailout of Bank Century (now Bank Mutiara).

Lawmakers said the money spent came from taxpayers.

Hekinus argued the money came from the premium collected from depositors, which was meant to be spent to save the banking sector.

Bank Negara Indonesia economist A. Tony Prasetiantono said the proposal was "a good idea but had limitations".

Hekinus also said that Indonesia expected to see a fiscal consolidation of European nations in fear their high budget deficit and high debt-to-GDP ratio might impact emerging economies.