Indonesia mulls tobin tax on foreign capitals to prevent short term flows

Source: Xinhua| 2019-01-08 21:54:16|Editor: xuxin
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JAKARTA, Jan. 8 (Xinhua) -- The Indonesian government is considering to apply tobin tax on foreign capitals, a move aiming at encouraging foreign capitals to park in a longer period in the country, Finance Minister Sri Mulyani Indrawati said on Tuesday.

The move came as Indonesia is vulnerable on the short term flows of capitals, which could lead to economic instability.

Minister Mulyani said the flows of capital must benefit the country's economic growth.

"The central bank, finance ministry, both are monitoring all development and see all options which are in line with legal regime of Indonesia," she said.

Meanwhile, for foreign investors who would like to reinvest their profits obtained from Indonesia, the minister said the government also considers rewarding them with a reversed tobin tax.

Indonesia, southeast Asia's biggest economy, had been impacted by the capital outflows or sell off in equity market after and amid the stepping up of normalization policy in the advanced nations.

It forced the government to bring down economic growth target as the country's central bank shifted its policy cycle to tightening from loosening.