Govt to give tax cuts, incentives for businesses

Govt to give tax cuts, incentives for businesses

Rendi A. Witular and Fabiola Desy Unidjaja, The Jakarta Post,
Jakarta

The government will provide a tax cut facility and other
incentives to the business sector as compensation for the
increase in utility rates.

The incentives were promised by Minister of Finance Boediono
during a meeting between business leaders and Vice President
Hamzah Haz and other senior economic ministers on Wednesday
afternoon. Boediono said that the tax office was considering
reducing luxury tax on some 20 product items.

"This is a fairly good signal although it is not our primary
demand. What we fought for is for the government to cancel the
utility rate' hikes," Sofjan Wanandi, a businessman and chairman
of the National Economic Recovery Committee (KPEN), told The
Jakarta Post after the meeting.

He said that among the 20 product items were televisions,
mobile phones, food and beverages, most of which were no longer
considered luxury items.

Some 150 businessmen under the Indonesian Chamber of Commerce
and Industry (Kadin), a powerful business lobby, participated in
the meeting, which was also joined by Coordinating Minister for
the Economy Dorodjatun Kuntjoro-Jakti, Coordinating Minister for
People's Welfare Jusuf Kalla, and Minister of Energy and Mineral
Resources Purnomo Yusgiantoro.

In a press conference prior to the meeting, Kadin chairman
Aburizal Bakrie said that in addition to calling for a
cancellation in the increase in utility charges, the businessmen
were also seeking incentives from the government to help the
business sector, hit by various uncertainties and problems at
home.

The government raised fuel prices, electricity rates, and
telephone charges earlier this month as part of efforts to cut
expensive subsidies and help ailing state-owned utilities. But
many businesses have complained that the price hikes would cause
production costs to increase and create difficulties for them
amid the weakening purchasing power of consumers.

During the meeting Dorodjatun told the businessmen that the
government could not delay or cancel the increase in utility
rates especially now that the government was close to meeting
with the country's traditional foreign donors grouped under the
Consultative Group on Indonesia (CGI), which will convene in Bali
on Jan. 21. He added that the policy was part of a program made
in agreement with the International Monetary Fund before the
country could end the Fund's economic program at the end of 2003.

The government's planned incentives were announced a day
before a joint demonstration planned by workers and employers in
Jakarta, which will be the largest demonstration since the
protests started three days ago.

Sofjan said that the joint rally would still take place
despite the promised incentives.

Elsewhere, Sofjan said that the government also promised to
cut bureaucratic procedures at the custom's office to allow
export-oriented industries to be able to get a refund within
seven days on the duties they paid when importing raw materials.

Currently most companies have to wait too long to get the
refund, costing them potential interest on the funds.

Furthermore, the government and the businessmen will set up a
joint task force chaired by Dorodjatun and Jusuf to identify
problems that have created a high cost economy. This includes the
elimination of illegal levies charged by corrupt bureaucrats and
hoodlums.

The government, said Sofjan, had also decided to allocate some
Rp 10 trillion worth of funds from the state budget to finance an
economic stimulus program. The funds would be channeled into
fisheries, agriculture and manufacturing.

Details of the compensation and list of high cost items will
be discussed further on Friday by the team.