Govt half-hearted in tax holiday incentive

JAKARTA. The Ministry of Finance (Kemkeu) will change the scheme of tax exemption or tax holiday. The change will be made as a step of win-win solution, so that tax revenues are not eroded further.

Head of the Fiscal Policy Office (BKF) at Ministry of Finance Suahasil Nazara said that the tax holiday became a dilemma for the Ministry of Finance, as the facility may reduce the state revenues, mainly from corporate income tax.

Suahasil admitted that Ministry of Finance was stingy in facilitating the tax incentive, therefore the companies were less attracted to apply for the tax holiday. During 2011-2016, there were only about nine companies have applied for the tax incentive.

Of the nine companies, only five companies were approved. "Since last year, we have discussed and tried to change the form of tax holiday. Now, it will be adjusted to the condition and the intensity of the company," he said at the National Working Meeting of the Indonesia Chamber of Commerce and Industry (Kadin) Indonesia, Wednesday (16/11).

According Suahasil, basically, granting tax holiday is not necessary to remove overall corporate income tax. The facility can be given between 10% to 100%, depends on the criteria of the company. "Later, Kemkeu will determine the ratio," he said.

Complicated terms

Vice Chairman of Kadin for Investment, Transportation, Information and Telecommunication sectors Chris Kanter said, the few number of companies, which applied for tax holiday, was caused by the complicated requirements. The lower the corporate income tax cuts, the fewer companies will apply for this facility.

"I hope the change will include easier rules. It should be seen in a holistic manner," he said.

Tax observer at Danny Darussalam Tax Center (DDTC), Darussalam said that the lack of enthusiasm of tax holiday does not necessarily mean that the incentives offered were not attractive. "It may also be driven by the lack of investments in Indonesia. Or, perhaps it may be affected by some factors, such as the low rank of starting business," he said.

According to Darussalam, the tax is not a major consideration for investors to enter and invest in Indonesia. In addition to taxes, political stability and legal certainty issues are much more important. Therefore, all sectors have to improve to attract investments, not only relying on tax incentive.

Let alone, in addition to the tax holiday, there is another option, namely tax allowance. "Taxpayers will see which facilities are most feasible," said Darussalam. Many companies that had wanted to join the tax holiday turning to tax allowance, as it is easier to obtain.

(Muhammad Farid/Translator)