Indonesian Goverment plan to offer tax incentives for Islamic finance. The central bank, Bank Indonesia, also plan to submit proposals, including tax cuts for mudarabah investment accounts.
A mudarabah is a partnership in profit, in which each party provides either capital or labor.
Bank Indonesia is proposing reducing income taximposed on returns earned from mudarabah accounts to 10 percent from 20 percent for customers and banks.
The plan will boost sales of Islamic debt from the nation with the world's biggest Muslim population. Indonesia had IDR 86 trillion of Islamic banking assets as of October 2010, or about 3 percent of the total, according to the central bank. That compares with RM337.6 billion ringgit in Malaysia, or 20 percent of banking assets.
Indonesia, which sold its first global Islamic bond in April 2009, will tap the international sukuk market in the first half of 2011. PT Bank Muamalat Indonesia, also aims to sell Islamic debt in 2012 depending on its business plan.
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