No more tax relief for foreign-funded projects
No more tax relief for foreign-funded projects
JAKARTA (JP): In a government attempt to support locally- funded projects, all contractors, suppliers and consultants involved in government projects financed by foreign loans will no longer be exempt from income tax.
A presidential decree was issued last month to implement the newly amended tax law, Tax Director General Fuad Bawazier said yesterday, and will apply to all contracts signed as of April this year.
The presidential decree was one of a series of regulations issued over the past few weeks to implement the new tax laws which were enforced early this year to replace the old ones enacted in 1983.
Fuad said that the new tax policy is expected to raise additional tax revenues of at least Rp 200 billion (US$93 million) in the coming fiscal year.
"We expect to collect around Rp 200 billion in income tax on the 11 trillion rupiah's worth of foreign-funded projects scheduled for the 1995-96 fiscal year," Fuad told reporters, adding that the new tax measure would not affect other taxes and levies.
"Other than income tax, all tax obligations for foreign-funded projects are still borne by the government," he said. "Contractors, suppliers and consultants are still exempt from import duties, surcharge tax, value added tax and sales tax for luxurious goods related to foreign-funded government projects."
The government, at present, exempts contractors, suppliers and consultants involved in foreign-funded projects from the above tax obligations so that all portions of the loans can be put toward project development.
As for the reasons behind the change, Fuad explained that the majority of contractors, suppliers and consultants taking part in government-funded projects are now profitable and less in need of income tax relief.
"Therefore, it will be fairer if the income tax relief is abolished," he said, adding that the new tax treatment is fully in line with the one applied to those undertaking locally-funded projects.
Tax returns
The tax director general yesterday reminded taxpayers that income tax returns for 1994 should be submitted to tax offices by the end of this month and that all returns will still be based on old income tax rates.
The new income tax law, effective as from January, reduces the income tax to 10 percent from 15 percent for the lowest income bracket, to 15 percent from 25 percent for the middle income bracket and to 30 percent from 35 percent for those in the highest income segment.(hen)