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