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)