Tax breaks fro Batam extended

The government has decided to extend value-added-tax (VAT) and luxury tax exemptions on the island of Batam in Riau province over the next six months.

Minister of Finance Boediono said the move was meant to give the government time to draft a bill that will give the island a free trade zone status.

"The imposition of the taxes will be delayed for six months so that there is enough time to prepare the bill," the minister was quoted by news portal Detik.com as saying.

Companies on the island have been exempted from VAT and luxury taxes for many years given its status as an industrial-bonded zone since 1978.

But, the Ministry of Finance recently planned to revoke the tax facilities at the start of next year in a bid to collect more tax revenue to finance the state budget deficit.

The plan, however, drew protests from various parties, including investors in Batam and local people, who gained backing from the Ministry of Industry and Trade.

Minister of Industry and Trade Rini M. Soewandi has asked the finance minister to extend the tax incentive scheme for six months to prevent investors from abandoning the island.

Regarding the bill on Batam's free trade status, Budiono said the bill was being drafted.

"We want to make a really good bill," Budiono added. --JP