Govt seek tax incentives to woo investors

JAKARTA (JP): State Minister of Investment and State Enterprise Development Laksamana Sukardi proposed on Wednesday various incentives, including an income tax holiday and an offer of permanent residency for foreigners in an attempt to bolster investment.

Speaking during a hearing with the House of Representatives, Laksamana said to revitalize the real sector, the government must review various incentives and abolish disincentives.

His proposal, presented to House's Commission V on industry and trade affairs, is subject to approval from the Ministry of Finance and the Ministry of Industry and Trade.

It includes a limited offer of a tax holiday, a scheme that runs counter to the existing tax law and the economic recovery program as worked out with the International Monetary Fund (IMF).

The Ministry of Finance is currently reviewing the tax holiday scheme instituted in February by the previous administration of former president B.J. Habibie. The scheme offers a tax holiday of up to 10 years for investors in 22 "pioneering" industrial sectors.

Laksamana's proposal is for an income tax holiday for all new investment projects until March 31. Thereafter, investors would be offered tax deductions.

"The idea behind this scheme is to attract investment within a short time so as to create more jobs and to boost economic growth," he said.

Calling the scheme an "Early Bird Program" he said only quick investors with commitment would benefit from these incentives.

His proposal also gives incentives to existing investors.

Investment projects that have not begun production would enjoy similar tax holidays and deductions for one year starting on Jan. 1.

He proposed to revive or extend import facilities, for up to one year, for companies which have been working at below capacity because of the crisis. Companies which raise their production capacity would be offered import facilities on raw materials.

Companies which have operated their machinery for the last five years would enjoy import facilities for spare parts equivalent to 5 percent of the machinery's value.

Laksamana offered companies exemption from land and property taxes during the construction period and two years thereafter.

There would also be income tax deduction for benefit payments to companies operating in remote areas and an exemption on value added taxes for export-oriented companies.

Laksamana also sought to attract foreigners as well as foreign companies to work in the country.

Foreigners investing more than $1 million should be given permanent resident status, he said.

He proposed six-year work permits for expatriates in the fields of quality control and export marketing, and two-year extensions for expatriates's work permits.

He said the Provisional Stay Permit Card (KITAS) should be turned into a multifunction immigration document.

He proposed to rescind a 1995 regulation requiring the presence of an Indonesian on a company's board of directors and that the personnel director must be an Indonesian.

To streamline the investment process, Laksamana suggested the establishment of service centers throughout Indonesia providing information on procedures, policies and opportunities, he said.

Economic indicators, immigration and labor issues and information on infrastructures would also be provided, he said. (03)