Investment and tax holidays

Investment and tax holidays

Recently, the Investment Coordinating Board (BKPM) chairman,
Theo F. Toemion, has suggested that the government needs to
provide incentives such as tax holidays, to encourage business
circles to invest in the real sector. BKPM has said that other
countries, such as China, Thailand, Philippines, Malaysia,
Vietnam and Brunei Darussalam provide tax holidays to attract
investors.

For Indonesia, tax holidays are not a new thing. At the
beginning of the administration of former president Soeharto,
between the late 1960s and early 1970s, the tax holiday facility
was provided to encourage investment in the real sector. Yet,
after investment had developed in this country and efforts had
been made to increase state income from the non-oil and gas tax
sector, the government stopped this facility. Nevertheless, tax
facilities such as tax exemption on capital goods imported by
investors continue to be given selectively.

By thoroughly understanding the pluses and minuses of tax
holidays, we agree the issuance of tax holidays should be carried
out selectively. It would be most appropriate if tax holidays are
only issued to investors willing to invest outside of Java and be
export-oriented. If the products are marketed at home, if the raw
materials and technology are mostly imported and the location is
outside Java, then the issuance of a tax holiday should neither
be given, nor allowed. Furthermore, to foster strong national
economic resilience, what Indonesia wants should be investment
that will reduce Indonesia's dependence on foreign countries and
spread to regions outside of Java.

-- Suara Karya, Jakarta