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Forming of holdings on track after tax snag cleared
After being delayed since June last year, the government will immediately resume a plan to pool shares of certain state companies into several holdings after resolving problems related to extra taxes
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After being delayed since June last year, the government will immediately resume a plan to pool shares of certain state companies into several holdings after resolving problems related to extra taxes.
Secretary to the State Minister for State Enterprises Said Didu said the Finance Ministry's directorate general of taxation had declared the establishment of holdings in which state companies will be tax free.
"The establishment of the holdings for plantations, fertilizers and mining companies are tax free because principally we only gather the stakes which actually belong to the state," he said.
The government plans to establish the holding companies in order to make it easier for state firms to raise funds for expansion and to boost coordination between state firms in the same sector.
With a large collateral base the holdings will have greater leverage in seeking loans and financing from banks and on the stock and bond markets.
The ministry has delayed the forming of the holdings after it found that the establishment would cost state firms a huge amount of money in additional taxes resulting from asset revaluation.
Cement manufacturer PT Semen Gresik, for example, has estimated the plan will cost the company about Rp 3 trillion (US$270 million) in taxes.
As previously reported, the ministry, as the state representatives of Semen Gresik, would request private shareholders to swap their shares for an equivalent in (waived) tax obligations.
The swap will result in increased share ownership for the government. Currently, the government has a 51 percent stake in Semen Gresik; 24.9 percent is held by the public and 24.1 percent is held by Blue Valley Holdings -- a subsidiary of the Rajawali Group.
Director General of Taxation Darmin Nasution has confirmed the establishment will be tax free, as long as it only gathers shares belonging to the state.
"If the establishment of a holding company doesn't involve public shares, it will be tax free," Darmin said.
In response to the tax chief's declaration, Said was upbeat that the holding company for fertilizer firms was likely to be launched first, as there are no privately or publicly held shares in the firms.
"So far, the holding company for fertilizer firms is almost ready. We have asked its management to start exercising the company's stakes," he said.
Fertilizers firms will be grouped into a holding named PT Agrokimia Nusantara and plantation firms will fall under the administration of PT Perkebunan Indonesia. PT Indonesian Resources Company will pool mining firms.
Holding companies for state banks and cement producers are also in the pipeline and are expected to be ready for launch by 2010 at the latest.
According to Said, the Ministry will soon meet the House of Representatives for securing approval for the planned holding companies.
Indonesia currently has 139 state companies with assets worth more than Rp 1,300 trillion.
State companies, which have become the country's economic backbone, are expected to pay the government Rp 31.5 trillion and Rp 35 trillion in dividends for the last two years, respectively. (hwa)
