Indonesia's Digital Industry Potentially Grew of US$150 B in 2025
Minister of Industry Airlangga Hartarto (Credit: Ministry of Industry)

JAKARTA (TheInsiderStories) – Indonesia will soon ratify fiscal incentives for the processing industry in the form of super deductible tax, said industry minister on Thursday (06/13). It said, industries that invest in vocational and research and development (R&D) activities will be given fiscal incentives in the form of tax relief.

Currently, said industry minister Airlangga Hartarto, the new policy have been initialed by all relevant ministries and are just waiting to be signed by President Joko Widodo.

The super deductible tax policy is one of the government’ efforts to foster a conducive business climate for the growth of the country’s industrial sector. He explained that the implementation of the super deductible tax policy will support the Making Indonesia 4.0 initiative.

The benefits of this policy for industry players include fiscal incentives tax allowances as well as tax holidays. He said, it will accelerate the national manufacturing industry and prepare it for the Fourth Industrial Revolution.

In the new tax relief scheme, the ministry proposed up to 200 percent tax relief for industries that invest in vocational education. As for those involved with R&D activities in order to create innovation, the ministry proposed up to 300 percent tax relief. Both of these are included in the priority strategy of the Making Indonesia 4.0 roadmap.

If for instance a company built an innovation center for R&D in Indonesia and they invested around Rp1 billion (US$69.93 million), the Indonesian government will provide a reduction of taxable income worth Rp3 billion in over five years. The company will be receiving a reduction that is three times the cost of their initial investment.

On the other hand, if a company cooperates and works with vocational high schools to provide vocational training, industrial equipment, and apprenticeship activities at a cost of Rp1 billion, the government will provide a Rp2 billion taxable income to the company.

There are certain conditions required by the company if they wish to get tax incentives for their R&D activities, Hartarto adds. One of which is that the results of the research carried out must have a major impact on the national economy such as increasing product competitiveness, spurring exports, and more employment.

The government will analyze and assess first if the company meets all the requirements before providing tax relief. The super deductible tax incentives are being provided to hasten the improvement of Indonesia’s human resource and prepare them for Industry 4.0.

Transforming into a digital industry requires that people are re-skilled and up-skilled, which will enable them to compete in the industrial sector. This effort is carried out as one of the strategies to capture opportunities for demographic bonuses experienced by Indonesia for the next 15 years.

The growing number of productive workforce is believed to be able to boost the performance and competitiveness of the national manufacturing industry. The Making Indonesia 4.0 Roadmap aims to include Indonesia in the ranking of the 10 countries that have the strongest economy in the world by 2030.

Written by Lexy Nantu, Email: lexy@theinsiderstories.com