Tax-break rulings for industries issued

The Jakarta Post, Jakarta

The government has finally issued tax-break facilities for certain industries as part of a stimulus package for the business sector.

The facilities were stipulated under three rulings which took effect on Aug. 13. The House of Representatives approved the tax-break plan in May.

The first ruling, Government Regulation No. 46/2003, waives value-added tax (VAT) on the import of capital goods (mainly machinery and factory equipment, excluding spare parts) by strategic industries.

The second ruling, Government Regulation No. 43/2003, scraps luxury tax in the import of certain automotive products.

Under the ruling, motorcycles with the capacity of below 250 cc, vehicles for goods delivery and commercial vehicles that can carry at least 16 people are all exempt from luxury tax.

Bambang Trisulo, chairman of Indonesia's Association of Automotive Manufacturers (Gaikindo), welcomed on Wednesday the ruling as it showed the government's seriousness in helping revive ailing domestic industries.

Bambang told The Jakarta Post that it could reduce business costs, increasing the industry's competitiveness, thus in turn encouraging more investments in the sector.

The two government regulations are part of the fiscal stimulus promised by the government to help boost investments in certain industries.

Meanwhile, the government has also issued Regulation No. 38/2003 which would also waive VAT on certain goods. The ruling allows VAT exemption for imports or the purchase of goods to be used by the Army or the National Police.

The VAT exemption can also be applied on the import and the purchase of spare parts for airplanes to be used by national air transportation companies.

Minister of Finance Boediono had previously said that the policy should bring a lot of revenue for the government, more than enough to offset the estimated Rp 1 trillion in potential losses in tax collection, as a result of the tax-break facilities.

Business groups have long lobbied the government for such a stimulus package, saying that domestic companies, especially the export-oriented ones, were facing difficulties in competing head- on in the international market with competitors from China and other countries, which are regarded as more efficient.

The new tax-break facility is the second fiscal-stimulus measure introduced by the government this year. The first, worth around Rp 6 trillion, was issued in January, in which the luxury tax on 45 products -- mainly electronics -- was eliminated.