Indonesia Rejects Tax Holidays To Attract Investment
Tuesday, February 23, 2010
In response to a previous suggestion that Indonesia should introduce tax holidays,
Anggito Abimanyu, the head of tax policy at the Finance Ministry, said, while
such a measure was not recognized under Indonesian tax law, that and other policies
could still be examined, if it were felt necessary.
A tax holiday is a temporary reduction or elimination of a tax, usually to
create an incentive for business investment. For example, a decrease or elimination
of corporate taxes can attract foreign investment or stimulate growth in selected
industries. A tax holiday is given in respect of particular activities, and
sometimes also only in particular areas with a view to develop those areas.
In fact, additional Indonesian incentives were originally suggested to increase
investment in the eastern regions of the country.
Abimanyu, however, pointed out that the government had already provided
other measures, for example the establishment of special economic zones where
companies receive reductions to income and land taxes, together with value-added
He also noted that the government had already granted various tax breaks recently
to particular sectors, reduced corporate income tax and given import duty subsidies.
However, he did say that, if the government believed that further tax incentives
were required, tax holidays could be appraised and there would also be a review
of possible additional measures.