The House of Representatives said Sunday the government may have to postpone its plan to introduce a tax holiday in a series of incentives proposed in the final draft of a presidential decree on industry development.
House special committee on income tax chairman Melkias Markus Mekeng confirmed said the current bill on income tax would not include provisions for a tax holiday.
"The bill clearly does not have any provision for a tax holiday. The issue doesn't even enter the committee's inventory of problems," Melki told The Jakarta Post.
"I think the government has failed to address the House on the tax holiday issue," he said, adding that the bill was already in a discussion stage which he expected to conclude in the first semester of this year.
Without provision for a tax holiday, he said, the government could not implement particular fiscal incentives for businesses.
Nevertheless, he said, the government could still give other incentives, such as the 25 percent tax discount for companies with more than 40 percent of shares owned by the public.
Earlier, the government had announced it was preparing a presidential decree on industrial development, which was said to include more business incentives, including a tax holiday.
On completion, the decree would authorize the industry ministry to give fiscal and non-fiscal incentives, support and other government facilities to certain industrial sectors.
Industry Ministry secretary general Agus Tjahjana said the ministry would prioritize five sectors eligible for the incentives in 2008. The industries are: manufacturing, agro-industry, transportation, electronics and information technology, with additional attention paid to small and medium size industries.
"Each of the industries will be studied again so as to decide which incentives would be appropriate, considering each industry requires different treatment," Agus said while adding that the fiscal incentive may include tax holidays.
Agus said the decree would serve as a guide for the implementation of the new Investment Law and the 2007 government regulation on tax income, which already allows 30 percent tax cuts for selected companies.
Under the regulation, the government has allowed 58 companies to write-off 30 percent of the total cost of an investment against tax. For instance, if a company's total investment is Rp 100 billion over a certain period, it can deduct a total of 30 billion from its corporate income tax within that period.
The tax holiday incentive, Agus said, depended on whether it gained the support of the House of Representatives, which were currently discussing a bill on income tax.
Deputy to cabinet secretary for Legal Affairs Iman Santoso told the Post that the final draft of the decree was still being discussed.
"The draft has not yet been signed by the President, however it is at the final stages of discussion," Iman said.
Amid the already troubled investment climate in the country, industry players said the need for business incentives was now greater than ever, due to the increasing price of oil, which had forced them to increase the price of products.
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