VAT and sales taxes in Batam still needed

VAT and sales taxes in Batam still needed

JAKARTA (JP): Director General of Taxes Machfud Sidik said on
Monday he had not received any order to cancel the government's
plan to impose 10 percent value-added tax (VAT) and sales tax on
luxury goods on Batam island.

Machfud said he had not been informed of any change in plans,
and added that the introduction of the taxes on the island, the
country's largest bonded zone, would "technically" be still
needed.

"For me, we (the government) in the long term still need to
impose value-added tax on Batam island," he said when asked to
comment on a statement by President Abdurrahman Wahid during his
visit to Riau on Saturday.

The President said he would consider canceling the plan to
impose the taxes, which have been widely opposed by foreign
investors on the island.

The government planned to impose a 10 percent VAT and a 10
percent to 35 percent sales tax on luxury goods on Batam,
starting in April. But its implementation was delayed until June
due to a widespread opposition from both the island's population
and businesses.

According to Machfud, the foreign investors, who mostly
operate in export-oriented businesses on the island, protested
the tax plan because they received misleading information about
the plan.

"Like those in other industrial bonded zones, export-oriented
industries on Batam are exempt from the new tax payment", he
said.

Batam has 85 export-oriented companies, mostly electronic
manufacturers.

Machfud said cancellation could result in lower revenue, but
if the plan was canceled he believed the government would manage
to cover the lost revenue from other sources of income. (07/rei)