Tax exemption proposed for travel in ASEAN

Tax exemption proposed for travel in ASEAN

JAKARTA (JP): Travelers leaving Indonesia for other ASEAN
countries can soon expect to be exempted from exit taxes
following the government's most recent commitment to spur
subregional economic growth and cooperation.

Coordinating Minister for Production and Distribution Hartarto
said the exit tax exemptions were expected to encourage travel
from Indonesia to other member countries of the Association of
Southeast Asian Nations (ASEAN).

"Hopefully, this will also spur cooperation within the ASEAN
economic growth areas," he said on Wednesday evening.

Eighteen Indonesian provinces form parts of the three
subregional economic cooperation areas or growth triangles, which
link all ASEAN countries except Vietnam. These areas are the
Indonesia-Malaysia-Thailand Growth Triangle, the Indonesia-
Malaysia-Singapore Growth Triangle and the Brunei-Indonesia-
Malaysia-Philippines East ASEAN Growth Area.

There are eight provinces involved in the growth areas in
Sumatra, four in Kalimantan, four in Sulawesi. Maluku and Irian
Jaya are also involved in the growth areas.

Hartarto said the exemptions from exit taxes for travel in
these economic cooperation areas was stated in Government
Regulation No. 57/1996.

However, he said, the government had not settled a timeframe
to implement the ruling, nor had it decided which airports and
harbors could apply the exemption.

The exit taxes are Rp 250,000 (US$108.7) for travelers leaving
the country by plane and Rp 100,000 for those traveling by ship.
According to sources, there are plans to increase these taxes.

Neighboring countries have long urged Jakarta to abolish the
taxes, saying they hamper the growth of regional cooperation.

Welcome

Businessman Sofyan Wanandi of the Gemala Group welcomed the
plan yesterday, saying it would not only benefit the governments
and businessmen of ASEAN countries but the common people as well.

"I think the high exit taxes are often one of the reasons
people are reluctant to travel overseas," he told The Jakarta
Post. "If many people travel, more interactions will take place,
and this is good," he added.

He said the tax exemption would also cut corporate costs,
which in turn would boost trade and investment in the region.

Sofyan noted, however, that the government must first develop
a control mechanism to ensure that the tax exemption is not
abused.

"They must be able to make sure that people don't just
stopover in Singapore to avoid the taxes before continuing to the
United States," he said.

Hartarto said that apart from applying exit tax exemptions,
the government was planning to provide non-fiscal incentives,
such as increasing the value limit allowed for commodities of
small-scale businesses to be exported duty-free.

The current limit of Rp 50 million, he said, would be
increased to Rp 100 million.

Other non-fiscal policies which are starting to be
implemented, or are currently being discussed, include the free-
flow of cross-border trade between Indonesia and neighboring
countries, the gradual provision of more transportation
facilities and the implementation of limited open-sky policies.

The government is also planning to reduce the telephone
charges linking places within the economic cooperation areas and
to expedite sea transportation between North Sulawesi and the
southern Philippines.

The economic cooperation areas were established three years
ago. Since then 47 memorandums of understanding have been signed.

Hartarto said that only 14 agreements had been followed
through so far. These relate to projects on trade, tourism,
telecommunications, services and construction of industrial
facilities. (pwn)