Finance minister, Sri Mulyani Indrawati sees Indonesian economic growth will depressed in the second quarter of 2020 caused of the heavy COVID-19 impact- Photo by Finance Ministry Office

JAKARTA (TheInsiderStories) – Indonesian government granted tax holiday  to eight companies with valued Rp161.3 trillion (US$11.12 billion) investment, said one senior official on Thursday (18/10). This tax incentive given amid the country’s effort to attract investors come to the country.

Among those companies, three are in electricity sector and others are in upstream base metal industry. The investors vary, from China, Hong Kong, Singapore, Japan, Netherlands, and Indonesia.
“In six months, there are eight taxpayers receiving tax holiday. More than before,” said Indonesia Finance Minister Sri Mulyani Indrawati at her office.
Until 2015, there were five taxpayers with Rp39.4 trillion investment commitment, receiving tax holiday but only three started production, said the minister. During  2015-2018, the incentive failed to attract companies. Later on, finance ministry simplified the regulation and made some revisions.
The revised-regulation simplifies some provisions for company to get tax-free facility. The simplification includes 100 percent income tax with minimum Rp500 billion’s investment for 17 pioneer industrial sectors. In the previous regulation, tax discounted tariff was ranged between 10 to 100 percent, for 5-15 years or even 20 years, that requires discretion from the Minister of Finance.

In April 2018, the ministry has conveyed the fiscal policy of the Minister of Finance Regulation Number 35/PMK.010/ 2018 concerning the Granting of Corporate Income Tax Reduction Facilities. The decree policy related to tax holiday‘s which contains the simplification of the process and content is the evolution of the two previous regulations, namely PMK Number 130 Year 2011 and PMK Number 159 Year 2015.

“The facility was launched in 2015, until today no one has been able to obey these rules. So we begin to think that means there is a policy that is not working well enough. So there is no need for further assessments, but later the Directorate General of Taxes will see it after the company runs,” explained by the minister.

Based on the decree, to encourage industry, investment and exports, the government through the minister of finance provides tax incentives in the form of a tax holiday, namely a reduction in corporate income tax. The tax holiday is given through three regulations, namely PMK 130/2011, PMK 159/2015, and PMK 35/2018.

Fiscal incentives according to PMK 130/2015 are given to five taxpayers in the basic organic chemistry industry, paper pulp, tissue and synthetic rubber industry. The total investment plan carried out was Rp39.4 trillion with the country of origin of the investors coming from Switzerland, the Netherlands and Indonesia. The investment is categorized as new investment with a total employment of 4,855 people.

Meanwhile, the tax holiday based on PMK 35/2018 was given to seven taxpayers from the electricity industry, steel milling industry, basic steel and steel industries, and non-iron basic metal industries. The total investment plan carried out was Rp153.6 trillion with the country of origin of the investors from China, Hong Kong, Singapore, Japan, the Netherlands and Indonesia.

Investment from six taxpayers is categorized as new investment and investment from one taxpayer is categorized as business expansion with a total employment of the seven taxpayer investments totaling 6,811 people.

Indonesia offered some new fiscal incentives to both corporate and individual taxpayers to improve investment climate in the country. The government is keen to improve the country’s ranking in the World Bank’s annual flagship report of Ease of Doing Business by offering relaxation in taxations and an eased customs policies.

Indonesia has progressed significantly in deregulating its policies, part of a reason it was able to climb 19 places to rank 72nd in the EODB index for 2018. However, the administration of President Joko Widodo, is keen to further improve the country’s level and seeks to further deregulate troubling regulations.