Foreign shipping firms to pay higher tax

JAKARTA (JP): Tax Director General Fuad Bawazier said here yesterday that the withholding tax imposed on foreign shipping companies will be increased as part of the government's tax extension program.

"I hope to announce the new rate later this month," he told newsmen when he was asked about the dominance of foreign shipping companies in the country.

He refused to elaborate about the planned rate hike but said that it would be much higher than the present level of 2.4 percent.

The tax imposed on foreign shipping companies, which at present carry around 90 percent of Indonesia's export and import goods and another 40 percent of goods shipped within the country, is part of the expansion of the withholding tax in the new tax law.

Hartoto, the chairman of the Association of Indonesian Shipping Companies (INSA), said that local shipping companies could not compete with foreign shipping firms not only due to their stronger fleets but also because of their lighter tax burdens.

Local shipping companies are required to pay a number of levies including operational and docking levies, in addition of income taxes, and import duty and sales tax during the procurement of the ships.

"The government has to give a special tax incentive to local shipping firms to enable them to compete," he said, adding that shipping firms in neighboring countries such as Singapore and Malaysia receive special tax subsidies from their governments.

Fuad, however, denied that the inability of local shipping companies to compete with their foreign counterparts was caused by their heavier tax burdens.

"It is easy to find a scapegoat," he said of the shipping association's argument. (hen)