“We want to make [the tax holiday] more attractive for investors,” he told The Jakarta Post in a recent interview. “We will still prioritize downstream sectors, basic industries, iron and steel, petrochemical, refineries, agriculture and forestry. We want to direct this measure to industries that use resources that we own, not import.”
Halfway through the year, the government is racing against time to launch a number of fiscal stimuli that include the expanded tax holiday, higher taxable income, fiscal incentives for special economic zones (KEK) and a tax amnesty for financial crimes, as growth shrank to 4.7 percent in the first quarter, a level unseen since 2009.
President Joko “Jokowi” Widodo wants the economy to grow 7 percent per year by the time his term ends in 2019, with investment in infrastructure seen as crucial to this goal. Investment, which accounts for a third of the country’s economy, is expected to grow 12 percent this year, according to the Investment Coordinating Board (BKPM).
Investors who had previously applied for the tax holiday but were ineligible were, said Bambang, encouraged to reapply.
The government also offers a tax allowance measure that cuts taxable income to 30 percent of total investment realized over six years, accelerates depreciation and amortization, charges tax of up to 10 percent on offshore taxpayers and carries forward losses from five to 10 years.