Govt about to issue new ruling on tax break criteria
Govt about to issue new ruling on tax break criteria
JAKARTA (JP): A presidential decree spelling out criteria for
tax breaks for particular investments will be released this month
and take effect in January, State Minister of Investment Hamzah
Haz said on Monday.
He said prompt issuance of the decree was important because
many prospective foreign investors were awaiting the ruling and
competition was intense in the region.
"The government has to immediately issue the tax holiday
criteria because of the stiff competition in the Southeast Asian
region to attract foreign investment," he told reporters after
meeting President B.J. Habibie.
The decree will outline general criteria and the specific or
technical criteria for projects to qualify for the facility,
Hamzah said.
He explained that included in the general criteria were
employment opportunities and locational aspects of an investment,
while specific criteria would include export and import
substitution benefits.
Tax breaks for investments outside Java would last for five
years, while tax facilities for projects in Java and Bali would
be for three-year durations.
Hamzah also said that approved foreign direct investment --
new projects, expansion, and transfer of status -- in the country
dropped by 60.65 percent during this year's January-Dec. 15
period to US$13.31 billion from $33.83 billion in the same period
in 1997.
He added that the number of foreign direct investment projects
rose to 979 during the period from 785 in the same period last
year.
The government approved 308 domestic investment projects worth
Rp 59.41 trillion ($7.9 billion), compared to 717 projects worth
Rp 119.87 trillion last year, Hamzah said.
Investments
The inflow of foreign investments is seen as one of the key
factors to help lift the country out of its economic crisis.
The ongoing social unrest is a major discouragement to foreign
investment, especially as Thailand and South Korea are considered
better choices due to their stability and quickened pace of
economic recovery.
Hamzah explained that the government had to cancel tax breaks
given to 10 companies following the public uproar over
allegations that similar facilities for six companies were based
on collusion and nepotism.
Among the companies granted special tax breaks in 1997 were PT
Kiani Kertas, PT Smelting Copper Co., PT Trans Pacific
Petrochemical Indotama, PT Seagate Technology Sumatra, PT
Polysindo Eka Perkasa and PT Texmaco Perkasa Engineering.
Pulp and paper giant Kiani, controlled by former president
Soeharto's close associate Mohamad "Bob" Hasan, was given a 10-
year income tax exemption because of its key role in developing
East Kalimantan where the company is located.
Trans-Pacific, controlled by well-connected businessman Hashim
Djojohadikusumo, received six-year tax break because it was the
country's first integrated olefin and aromatic center.
Seagate received a nine-year tax holiday because of its
pioneering role in producing electronic components.
Textile-related industries Polysindo and Texmaco, controlled
by the Texmaco Group, were exempted from income taxes for eight
years and five years respectively because of their technology
Govt about to issue new ruling on tax break criteriainnovation
and export-oriented operations. (rei/prb)