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Govt to provide tax incentives to help shore up real sector
The government will provide tax incentives of Rp 12
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he government will provide tax incentives of Rp 12.5 trillion (US$1.13 billion) next year to help the real sector brace for the impact of the global financial crisis, the Finance Ministry announced Friday.
The incentives will take the form of waived income tax and value-added tax for industry, worth up to Rp 10 trillion, and import duty and import tax, worth Rp 2.5 trillion, said Anggito Abimanyu, the ministry's head of fiscal policy.
The waived payments would be covered by the Finance Ministry so as not to reduce the government's revenue target.
"We'll continue overseeing the development (of the real sector). But we can accelerate the execution (of the incentives), which only requires Finance Ministry regulations," he said at a press briefing.
Anggito said the incentives would be enjoyed by companies in the food, energy and selected sectors. He did not elaborate on the selected sectors.
"(The incentives) are aimed at reducing the costs of businesses or small and medium enterprises. We have already set aside the money without having to reduce revenues," he said.
The incentives were included in the 2009 state budget, approved Thursday by the House of Representatives. The budget gives the government enough room to adjust to the impact of the global financial turmoil.
A downturn in the real sector could trigger mass unemployment, and consequently less consumer spending, on which the Indonesian economy relies heavily.
Consumer spending makes up about 65 to 70 percent of the country's GDP.
The Finance Ministry is targeting economic growth of 6 percent in 2009. It expects the poverty rate to drop to between 12 and 14 percent and unemployment to between 7 and 8 percent.
M.S. Hidayat, chairman of the Indonesian Chamber of Commerce and Industry (Kadin), said the ministry should have a clear target to maximize the incentives.
"The fund should be spent to support export-oriented small and medium enterprises that have the potential to grow amid the global crisis," he told The Jakarta Post.
Among these enterprises are those producing handicrafts, batik, rattan and songket (gold- or silver-woven fabrics), he said.
"Other sectors that may need part of the fund are industries in dire need of liquidity but facing difficulty getting it because banks are reluctant to give loans," Hidayat said.
These would be labor-intensive industries, he went on, such as the textile and footwear industries.
Edy Putra Irawady, deputy minister of trade and industry at the Office of the Coordinating Minister for the Economy, said "The most important thing is that such industries support our economic growth and are export-orientated."
