Revival of tax holiday possible for certain areas

Revival of tax holiday possible for certain areas

JAKARTA (JP): The government, which terminated tax holiday
provisions in 1984, is likely to reintroduce such incentives to
foster investment in the eastern part of the country.

"It's possible to revive the tax holiday in certain areas,
especially in eastern Indonesia, to attract investors to the
area," State Minister for Investment Sanyoto Sastrowardoyo said
in a hearing with the Budgetary Commission of the House of
Representatives (DPR) here yesterday.

Tax holidays, a tax exemption given to new investors during
the first years of operation, were terminated in 1984 when the
government effected a tax reform. The tax reform, stipulated
under four tax laws, will be amended by four bills currently
being deliberated by the DPR and the government. The House is
expected to pass the bills into laws on Nov. 12.

Sanyoto, who is also chairman of the Investment Coordinating
Board (BKPM), said yesterday that one of the articles of the bill
on income tax, if enacted, will allow the introduction of tax
holidays in certain areas of the country for a certain period of
time.

Incentives

In addition to the tax holiday, Sanyoto said his office will
also propose the introduction of other incentives for investors
operating in eastern provinces, such as lower interest rates and
longer grace periods for banking credits and the reduction of
private spending on infrastructure development and fringe
benefits to taxable incomes.

"Building infrastructures is the government's responsibility.
But because government funds are limited, investors are expected
to build the needed infrastructure facilities themselves, the
funds then being deductible from their taxable profits," Sanyoto
said.

Fringe benefits given by the companies to their employees,
such as allowances for medical treatments and housing, can also
be deducted also from their taxable profits.

Asked when the proposed incentives would become government
policy, Sanyoto said he couldn't promise anything since he did
not have the authority to decide.

However, I have sent the incentive proposals to two
coordinating ministers -- the Coordinating Minister of Economy
and Finance and the Coordinating Minister for Industry and Trade
-- who have the authority to take deregulatory measures," Sanyoto
said.

A number of legislators at the commission, including Tadjuddin
Noer Said, Bambang Warih Kusuma and Hamzah Haz, supported
Sanyoto's plan of giving incentives to investors in eastern
Indonesia, including provinces in Kalimantan, Nusa Tenggara, East
Timor, Sulawesi, Maluku and Irian Jaya.

Tadjudin told The Jakarta Post that giving incentives to new
investors should have been the government's long term policy as
it is vital in attracting business to the least developed areas.

"The incentives should be a part of the government's policy
that hopes to encourage private sector investment in Indonesia's
Rp 660.1 trillion (US$303 billion) sixth five-year plan."
Tadjuddin said. (rid)