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Group seeks VAT exemption for construction industry
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Coordinating Economic Minister Darmin Nasution flanked by Manpower Minister Hanif Dakhiri (right) and Finance Minister Bambang Brodjonegoro, briefs the media on the government's economic package stimulus on Oct. 15, 2015. Darmin, who once headed the Tax Office, issued the regulation that imposed a VAT on the construction industry, which is now considering giving more support to ailing local contractors on the back of stricter competition. (the jakarta post/Wienda Parwitasari)
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span style="line-height: 20.8px;">The Indonesian Contractors Association (AKI) has called on the government to grant a tax exemption to the construction industry by revoking the 3 percent prepaid value-added tax (VAT).
In 2008, then tax director general Darmin Nasution, who is now coordinating economic minister, imposed a 3 percent VAT on construction businesses.
The tax is charged based on contract value instead of actual payments made by contractors. The tax office reasoned that the tax should be calculated in such a way because of the complexity of payments for construction projects, which often involve many kinds of invoices.
"Aside from financing from the banking sector, we need more support such as tax exemption,” AKI secretary general Zali Yahya said on Thursday.
The revocation of the VAT, Zali said, was crucial, especially for local contractors handling construction projects abroad, who have a different success ratio.
“In most cases, what we gain [in the projects] is not always the same as [the value stated in] the contracts,” Zali asserted.
Zali said the construction industry was currently anticipating tighter competition with the full implementation of the ASEAN Economic Community (AEC) that includes AEC Mutual Recognition Agreements (MRAs) for people working in the construction industry, such as engineers and architects.
Zali said Indonesian contractors expected tougher competition from Malaysian and Singaporean companies, whose workers had better skills and a higher level of professionalism, although their own markets were relatively small compared to Indonesia.
"It is true that we need to defend our market, but we need to attack as well. We hope that our ambitions of more Indonesian contractors playing on the ASEAN field can be supported by the government," he said, adding that some Indonesian contractors, such as Wijaya Karya, Pembangunan Jaya, Waskita Karya, and Pembangunan Perumahan, were ready to compete on the regional level as well. (dmr)
