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The House of Representatives said Sunday the government may
have to postpone its plan to introduce a tax holiday in a series of
incentives proposed in the final draft of a presidential decree on
industry development.
House special committee on income tax chairman Melkias Markus Mekeng
confirmed said the current bill on income tax would not include
provisions for a tax holiday.
"The bill clearly does not have any provision for a tax holiday. The
issue doesn't even enter the committee's inventory of problems," Melki
told The Jakarta Post.
"I think the government has failed to address the House on the tax
holiday issue," he said, adding that the bill was already in a
discussion stage which he expected to conclude in the first semester of
this year.
Without provision for a tax holiday, he said, the government could not
implement particular fiscal incentives for businesses.
Nevertheless, he said, the government could still give other
incentives, such as the 25 percent tax discount for companies with more
than 40 percent of shares owned by the public.
Earlier, the government had announced it was preparing a presidential
decree on industrial development, which was said to include more
business incentives, including a tax holiday.
On completion, the decree would authorize the industry ministry to give
fiscal and non-fiscal incentives, support and other government
facilities to certain industrial sectors.
Industry Ministry secretary general Agus Tjahjana said the ministry
would prioritize five sectors eligible for the incentives in 2008. The
industries are: manufacturing, agro-industry, transportation,
electronics and information technology, with additional attention paid
to small and medium size industries.
"Each of the industries will be studied again so as to decide which
incentives would be appropriate, considering each industry requires
different treatment," Agus said while adding that the fiscal incentive
may include tax holidays.
Agus said the decree would serve as a guide for the implementation of
the new Investment Law and the 2007 government regulation on tax
income, which already allows 30 percent tax cuts for selected companies.
Under the regulation, the government has allowed 58 companies to
write-off 30 percent of the total cost of an investment against tax.
For instance, if a company's total investment is Rp 100 billion over a
certain period, it can deduct a total of 30 billion from its corporate
income tax within that period.
The tax holiday incentive, Agus said, depended on whether it gained the
support of the House of Representatives, which were currently
discussing a bill on income tax.
Deputy to cabinet secretary for Legal Affairs Iman Santoso told the
Post that the final draft of the decree was still being discussed.
"The draft has not yet been signed by the President, however it is at
the final stages of discussion," Iman said.
Amid the already troubled investment climate in the country, industry
players said the need for business incentives was now greater than
ever, due to the increasing price of oil, which had forced them to
increase the price of products.
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