Govt to extend tax exemption in Batam

The Jakarta Post, Jakarta

The government plans to release a ministerial decree to extend value-added tax and luxury tax exemption on Batam island in the province of Riau before the end of the year, when the tax incentive scheme expires.

Minister of Finance Boediono told reporters last week that the government had actually decided to issue the decree but it delayed the issuance due to the tight schedule in preparing the 2002 budget and national holidays.

Previously, Minister of Trade and Industry Rini M. Soewandi had asked the minister of finance to extend the tax incentive scheme for six months until the middle of 2002.

She gave the reason that to transform Batam into a free trade zone took some time and the new bill on Batam's free trade status had not yet been completed.

The government has planned to turn Batam into a free trade zone by Jan. 2002.

Batam island has been an industrial bonded zone since 1978, enticing foreign investors with schemes such as the exemption of value-added tax and luxury tax.

As part of efforts to boost tax revenue, the ministry of finance has voiced plans to revoke the tax exemptions, but the plan drew protests from various parties, including investors in Batam as well as the local people, who were further supported by the Ministry of Industry and Trade.

Director general of tax at the Ministry of Finance Hadi Purnomo earlier said that Batam would have to pay value-added value and luxury taxes starting January 2002 unless the government issued a decree to extend the tax incentives.