House agrees to cancel luxury tax on Batam

JAKARTA (JP): The House of Representatives special team for the state budget has approved the government's plan to postpone until the end of the year the imposition of luxury tax on Batam island.

The special team's chairman, Abdullah Zainie, said the special team supported the postponement of the luxury tax because there was no clear regulation regarding the status of the island.

Minister of Finance Prijadi Praptosuhardjo also said that the postponement was made because of the uncertainties over the status of Batam, whether it was an industrial bonded zone or a free trade zone.

"It (the law which determines the status) is still in the making," he said.

Batam island in the Riau archipelago was declared an industrial bonded zone by the government in 1978 to attract foreign investment.

In 1998, the government decided to introduce luxury tax on the island because, despite its status as a industrial bonded zone, Batam also has noncommercial inhabitants.

Massive protests followed the decision, which was originally to take effect in April last year, both from the Batam residents and from foreign industrialists.

Former director general of taxes Machfud Sidik earlier said that if luxury tax was not imposed on businesses in Batam, the country could lose about Rp 300 billion a year. Machfud has now been replaced by Hadi Poernomo. (tnt)