New tax rule for Batam opposed<\/p>\n
BATAM, Riau (JP): A new government regulation imposing value-
\nadded taxes (VAT) and sales taxes on luxury goods on Batam and
\nneighboring islands has drawn opposition from locals and
\nentrepreneurs.<\/p>\n
The head of tourism, post and telecommunications at the Batam
\nchapter of the National Chamber of Commerce and Industry,
\nMuzakiriyanto, said on Tuesday the new ruling, which took effect
\non April 1, would hamper foreign investment on the island.<\/p>\n
\"Foreign investors will judge Indonesia as inconsistent
\nbecause it has imposed taxes on an area which it previously said
\nwas an industrial bonded zone, where business activities are
\nexempt from tax obligations,\" he told The Jakarta Post.<\/p>\n
\"Soon many foreign investors will pull out of Batam because of
\n(the new regulation),\" he said.<\/p>\n
He said the new tax regulation not only affected
\nbusinesspeople, but also local residents because it caused the
\nprices of consumer goods to increase.<\/p>\n
Thousands of Batam residents staged a demonstration on Monday
\nto protest the regulation.<\/p>\n
In an attempt to attract investors to Batam, the government
\nmade Batam, some 19 kilometers south of Singapore, an industrial
\nbonded zone in 1978. Later, several islands near Batam, including
\nKarimun and Bintan, were included in the bonded zone.<\/p>\n
According to the previous policy governing this bonded zone,
\nbusinesses on Batam and the other islands in the zone were free
\nfrom all import duties and \"other government levies\".<\/p>\n
However, the government waived the tax incentives in 1998 at
\nthe prompting of the International Monetary Fund.<\/p>\n
Under the new regulation, export-oriented companies will
\nreceive refunds for VAT and luxury good tax payments only after
\nthey show proof they exported their products.<\/p>\n
According to the head of the Batam Island Authority, Ismeth
\nAbdullah, the previous tax policy was successful in encouraging
\nforeign investors to open businesses on the island.<\/p>\n
He said foreign investment on the island had grown steadily
\nand presently reached US$7 billion.<\/p>\n
\"About 77 percent of the investments are by private companies,
\nwhile the remaining 23 percent are by governments,\" Ismeth was
\nquoted by Antara news agency as saying.<\/p>\n
He said the investments were in various projects, including
\npublic road construction and harbor and airport facilities.<\/p>\n
\"The government's decision to impose the value-added tax will
\ncertainly discourage investors,\" he said.<\/p>\n
Ismeth said foreign investors were mainly concerned the new
\npolicy would become an administrative snag for daily business
\noperations.<\/p>\n
In addition, they are also concerned the imposition of the
\ntaxes will raise labor costs in the area, he said. (cst)<\/p>",
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