Tax facilities halted pending new policy
JAKARTA (JP): The government has stopped granting special tax facilities to local and foreign companies until a new policy on tax incentives is issued, State Minister of Investment Hamzah Haz said yesterday.
"We are studying the effectiveness and transparency of the tax incentives," Hamzah, who is also chairman of the Investment Coordinating Board, told reporters.
The government will come up with new criteria to receive tax breaks and the time-span of the facilities, he said, adding that a presidential decree would be issued for the new policy soon.
Nine recent applications which were being considered as the next recipients of the incentives have been postponed.
The nine companies must reapply when the new policy is issued if they wish to receive tax holiday, Hamzah said.
Last year the government granted income tax holidays for between five and 10 years to six companies for their pioneering roles in their respective business fields.
The tax breaks granted would remain, as they had been decided according to the policy of the government at that time, Hamzah said.
"The six companies were set up under the old criteria. We do not need to make a fuss about it. However, if there are elements of KKN (corruption, collusion and nepotism), that's another process," he said.
Hamzah, one of the only three cabinet members picked from opposition parties by President B. J. Habibie, promised after his appointment last month to review the tax breaks given to companies owned by the family and friends of ex-president Soeharto, and to revoke facilities obtained through political connections.
The large six companies granted special tax breaks last year are the two listed wings of textile producer Texmaco Group, PT Polysindo Eka Perkasa and PT Texmaco Perkasa Engineering; PT Smelting Copper Co.; PT Trans Pacific Petrochemical Indotama; PT Seagate Technology Sumatra and PT Kiani Kertas.
The pulp and paper giant, Kiani, is controlled by Soeharto's long-term pal Mohamad "Bob" Hasan, while Trans-Pacific is controlled by well-connected businessman Hashim Djojohadikusumo.
Hamzah said yesterday he feared that the lifting of the facilities for the six companies would drive potential investors away, as it would create legal uncertainty.
"Incentives are still very much needed to attract investors, especially during the current situation when investment growth had been set back to the levels of the 1970s," he said.
Hamzah admitted that political instability had caused a drop in investment.
The value of local investment licensed last month was Rp 5.4 trillion (US$385.71 million), while foreign investment reached US$1.1 billion, compared to Rp 14.9 trillion and $12.2 billion respectively in May last year.
In the first two weeks of this month, the board approved new foreign investments worth $2.4 million and new domestic investment worth Rp 188.12 billion.
The ministry has also approved $4.35 million worth of investment for the expansion of two foreign companies and $ 145 million for 11 new projects.
Hamzah said Spitsbergen Oil and Gas Ltd, a consortium of Norwegian, British and Middle East companies, is waiting for the President's approval to invest in a $3 billion dollar refinery project in Purworejo, Central Java.
A local company, whose name he did not disclose, had applied to invest in a petrochemical and olefin aromatic project in Sulawesi worth Rp 9 trillion, he said. (das)