http://www.loc.gov | 07 JUNI 2015
Jul 06, 2015) Indonesia’s government is planning to revise the country’s corporate tax structure next month. The changes will amend the tax holiday regulation and are designed to encourage investment and economic growth. (Esther Samboh & Anggi M. Lubis, Govt to Expand Corporate Tax Discounts, JAKARTA POST (June 29, 2015).)
Under the new rules being considered, corporate tax discounts of 20 to 100%, effective for 15-20 years, would be available. (Id.) Current regulations have such tax holidays for much shorter periods, of five to ten years. (Tax Holiday, INDONESIAN TAX (Feb. 28, 2013).) According to Minister of Finance Bambang Brodjonegoro, the tax relief would be extended to more sectors of the economy than are currently eligible, but the threshold investment would remain at Rp1 trillion (about US$75 million). He encouraged businesses that had failed to qualify for the exemption in the past to reapply. (Samboh & Lubis, supra.) The Minister added that Indonesia wants “to make [the tax holiday] more attractive for investors. … 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.” (Id.)
Brodjonegoro went on to distinguish the proposed the tax holiday from a tax allowance already in place that permits some companies to calculate tax owed based on a taxable income equal only to 30% of their total investment for a six-year period. Other benefits, such as accelerated depreciation schedules, would also remain in place. (Id.)
Reaction to Tax Holiday Proposal
Some investors are reportedly unsure as to whether going through the administrative procedure to obtain the tax holiday would result in enough financial benefit to make the effort worthwhile. (Id.) According to Yustinus Prastowo of the Center for Indonesia Taxation Analysis, a policy think tank, “[a] tax holiday is just a dessert. Without it, businesses can still eat.” (Id.) One former member of the Tax Revenues Optimization Team, a body within the taxation branch of the Ministry, noted that it is “ineffective to maintain a tax holiday as an incentive model” in place of legal certainty, political stability, and low logistical costs as investment incentives. (Id.)
Azbar Lubis, the Deputy Head of the Indonesian Investment Coordinating Board, approved of the Ministry of Finance plan and promised to work on revisions of regulations covering economic sectors with many employees and sectors that “strengthen the structure of the economy, support exports, substitute imports, downstream mineral products, boost fisheries and agriculture and make contributions, especially outside Java.” (Id.)
