Tax facilities halted pending new policy

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)