{
    "success": true,
    "data": {
        "id": 1865844,
        "msgid": "economist-pfii-needs-strong-foundation-before-tax-incentives-1784292923",
        "date": "2026-07-17 19:28:55",
        "title": "Economist: PFII Needs Strong Foundation Before Tax Incentives",
        "author": "",
        "source": "ANTARA_ID",
        "tags": "",
        "topic": "Economy",
        "summary": "An economist has cautioned that Indonesia's planned International Financial Centre (PFII) must first establish robust legal and regulatory foundations before offering tax incentives. Yusuf Manilet of CORE Indonesia argues that without credible oversight, ease of capital repatriation, and dispute resolution, generous tax breaks risk merely masking structural weaknesses. The government is currently drafting a bill proposing a 0% tax rate for up to 50 years in the zone.",
        "content": "<p>Economist Yusuf Rendy Manilet from the Center of Reform on Economics\n(CORE) believes the planned Indonesian International Financial Centre\n(PFII) requires a strong foundation before offering tax incentives to\nattract investors, including legal certainty and credible regulators.\nBased on the experience of various financial centres, he noted that\ninvestors also consider the ease of capital repatriation, deep financial\nmarkets, and certainty in dispute resolution. \u201cTax becomes an added\nvalue only when the foundation is strong. If the foundation is not\nready, overly large incentives become a signal that we are trying to\ncover structural weaknesses with tax discounts,\u201d he said on Friday.\nYusuf also assessed that the effectiveness of tax incentives to attract\ninvestors is limited, especially since Indonesia has adopted the 15\npercent global minimum tax under the OECD\u2019s Pillar Two. For large\nmultinational companies, if Indonesia does not collect the tax, the\nshortfall can be collected by the investor\u2019s home country, causing\nIndonesia to lose potential revenue without genuinely increasing\ninvestment appeal. The greatest benefit might be enjoyed by entities\noutside the scope of such rules, like family offices or medium-sized\ninvestment funds. He added that the challenge in supervision is not\nabout increasing the number of supervisory bodies, but ensuring the\nregulatory design does not create loopholes for abuse from the outset.\nFacilities should be limited to entities with genuine economic activity\nin the zone, not just those shifting their administrative address. \u201cIt\nis no less important that tax facilities do not become a gateway for\ndiverting income that actually originates from Indonesia. If that\nhappens, the PFII will not create new investment but merely shift the\ntax base from one region to another,\u201d he said. Yusuf also warned of the\nhigh risk of round-tripping, noting that some Indonesian capital has\nhistorically returned through other jurisdictions and is recorded as\nforeign investment. If the PFII\u2019s design is not careful, the zone could\nbecome a cheaper channel for such practices. Therefore, oversight must\ngo beyond identifying the investor\u2019s country of origin to identifying\nthe ultimate beneficial owner and ensuring incoming funds are genuinely\nnew capital. From a governance perspective, he views the credibility of\nthe regulator as far more important than the size of fiscal incentives.\nThe regulator must be independent from the zone\u2019s management and\nbusiness actors to avoid conflicts of interest. Investors also need\ncertainty that contracts are enforceable, disputes are resolved quickly,\nrules do not change arbitrarily, and capital can flow in and out without\nhindrance. \u201cWithout all that, no amount of tax incentives will be enough\nto build trust,\u201d he said. The government and the House of\nRepresentatives (DPR) are currently drafting the PFII Bill, with\napproval targeted at a plenary session on 21 July 2026. The bill is\nexpected to be enacted within three months, between June and August\n2026. The Chair of Commission XI of the DPR, Mukhamad Misbakhun,\nrevealed the government is proposing a 0 percent tax incentive for\nbusinesses in the PFII zone for up to 50 years. \u201cPersonally, I think the\nincentive should be permanent as long as the PFII exists, but the\ngovernment wants 50 years. However, 50 years is okay, because we will\nsee how things develop over the next 50 years,\u201d he said at an investment\nforum.<\/p>",
        "url": "https:\/\/jawawa.id\/newsitem\/economist-pfii-needs-strong-foundation-before-tax-incentives-1784292923",
        "image": ""
    },
    "sponsor": "Okusi Associates",
    "sponsor_url": "https:\/\/okusiassociates.com"
}