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NEWS UPDATES 13 October 2010

Indonesia still lags in tax incentives

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Indonesia still lags behind Southeast Asian countries such as Singapore, Malaysia, the Philippines and Vietnam in providing investment incentives to foreign investors, a senior government official has said.

Speaking in a House of Representatives (DPR) hearing in Jakarta Tuesday, the chairman of the Investment Coordinating Board (BKPM) Gita Wirjawan said the incentives provided by these countries to foreign investors were much better.

Realizing the important of incentives in attracting foreign investments, he said his office was now discussing with various ministries the possibility of providing tax holidays for companies operating in certain business areas.

"We have coordinated with the Industry Ministry and the Finance Ministry. In principle, we have reached an agreement on the importance of tax holidays."

He said the government, under article 18 of Law No.25/2007 on Investments, could provide tax holidays to companies operating in certain areas or those considered as pioneering industries.

In order to solve the problem, Gita said that his office would propose to establish a legal umbrella to specially regulate the provision of investment incentives so that this would not violate the tax law.

Apart from tax holidays, he said, the government was working to improve the business and investment climate. "We provide easier procedures for investors to get licenses and non-license services," he said.

To achieve its investment targets, he said, the government would synchronize regional investment services by accelerating the implementation of the national single window for investment scheme (PTSP) in the provinces as stipulated in a recent agreement including the home affairs ministry, administrative and bureaucratic reform ministry and the BKPM.

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