An Indonesian minister has said that the government is preparing tax-holiday scheme that would be imposed on five capital-intensive business sectors in a bid to help spur economic growth, local media reported Tuesday.
Finance minister Agus Martowardojo said Monday that the tax holiday would cover the base metal, oil refinery, renewable energy, machinery and telecommunication.
In addition to the special tax, the government regulation, which provides tax allowances, would be revised so that more industries would be covered, Agus said.
He also said, however, that he preferred to call the rules 'special fiscal programme for specific industries' instead of 'tax holiday'.
Under government regulation, widely known as the 'tax allowance' regulation, the government offers income tax reductions for investments in 15 specific business sectors, such as animal husbandry, textile industry and chemicals and in specific regions from Batam to Papua.
The main point of the regulation is the reduction of tax income by 30 per cent for six years, meaning 5 per cent income tax reduction per year. However, the regulation is considered too rigid on certain classifications of sectors compared with the proposed 'tax holiday' for wider industries.
The revision of the regulation will ease flexibility to add more sectors to receive tax allowances and will add about 118 new classifications of business sectors — from about 60 at present.
Agus and Coordinating economic minister Hatta Rajasa said the government was still finalising both regulations on the new 'tax holiday' and the revised tax allowance, citing a 'Soeharto-era' six-year tax holiday model as a benchmark.
'We have proposed a regionalisation system for [the tax holiday regulation], so there would be sector-based incentives and regional-based incentives,' Hatta was quoted by the Jakarta Post as saying, adding that the incentives would be 'tailor-made'.
According to Hatta, the revision of the government regulation will be finalized on Thursday in a cabinet meeting with President Susilo Bambang Yudhoyono. 'It must be done by this July,' he said, expecting the regulation to be effective in August.
Indonesia is pushing efforts to lure investors' interests in to invest in the country as the government will need trillions of rupiah investment to realise its ambitious 4,000 trillion rupiah ( $468.3 billion) economic master plan for 2011 to 2025, aimed at boosting the country's gross domestic product, approximately $4.5 trillion, making Indonesia among the world's 10 largest economies.
Investors' interests in Indonesia, one of the most attractive emerging markets in the world, have been peaking in recent years as the country has shown stellar economic growth amid global slowdown, economists have said.
The upward trend in investment, which increased 54 per cent to Rp 208.5 trillion in 2010, has supported the country's economic growth to accelerate by 6.1 per cent during the year and has helped add nearly 4 million new jobs, government's data shows.
Source : New Age
