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Banks: Pressured by tax rulings

Banks are currently under pressure, not only from deceleration in loan growth and worsening assets quality, but also from two issues stemming from corporate tax rates: (1) the on-going tax dispute on loan write offs and (2) the upcoming proposed tax deductibility only being applicable for written off loans of more than IDR50mn (USD3,800) with tax IDs (NPWPs).

The 2010 tax dispute is due to a disagreement on treatment of loan write offs referring to the Finance Ministry Decree No.57/PMK.03/2010, which requires net loan write offs post consideration of potential recoveries to be applicable for tax deductibility.

The total shortfall is estimated at IDR3.57tn (USD275mn). This combined with shortfall in VAT would require BBNI to pay additional tax of IDR1.63tn, followed by BBRI’s IDR1.45tn, BMRI’s IDR1.11tn and BBCA’s IDR136bn. Read more click here

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