Tue, 01 Mar 2011

From: The Jakarta Globe

By Dion Bisara
The government issued six initiatives on Monday aimed at bolstering the purchasing power of low- income citizens and improving business competitiveness, Finance Minister Agus Martowardojo said.

The initiatives, he said, are effective immediately.

The first incentive addresses tax breaks for housing purchases, Agus said. The government has increased the tax break threshold for home purchases to Rp 70 million ($8,000) from the previous limit of Rp 55 million.

“This is to allow people with low incomes to own a house. We need to adjust the incentives considering inflation and rising property prices. Rp 55 million is just not relevant anymore,” Agus said.

He added that the 10 percent value-added tax would be waived if the selling price of the house did not exceed Rp 70 million.

The government also extended a value-added tax cut for traders of low-cost cooking oil until the end of this year.

“We anticipate an increase in global palm oil prices, so this policy is needed to offset the effect,” Agus said, adding that the government had earmarked Rp 250 billion for the value-added tax cut.

The government also announced on Monday that it would provide advance money to the State Logistics Agency to cover 50 percent of payments for inexpensive rice. That, Agus said, will allow the agency to expedite its purchase and distribution of rice to poorer citizens.

Under another new initiative, contract manufacturers will now get a tax break. Contract manufacturers handle assembly jobs for foreign companies.

These manufacturers previously had to pay import tax on raw materials brought in from other countries, but were blocked from claiming it back when they sent the finished products to clients overseas. Non-contract manufacturers that import raw materials and sell the finished products abroad can claim their import tax against export taxes owed.

“We hope this will even the field and help contract manufacturers grow,” Agus said.

In another initiative, unsold goods will now have their value- added tax based on their actual sales prices, and not on import prices. “This will help businesses clear their warehouses, helping them to improve turnover and business,” Agus said.

The government is also streamlining the time it takes to distribute foreign aid.

“Currently, social aid, grants, cultural goods or supplies for public interest [from foreign countries] have to wait for more than two months because they need Finance Ministry clearance,” he said. “But now, the customs and excise director general can give the clearance. So there will be no more stories of foreign aid groups having to wait to build bridges in disaster areas.”