T

he Finance Ministry announced on Monday six new policies termed the “February policy package”, which includes new tax regulations to spur growth and grants to the poor.

“With the new policies our mission is for the Finance Ministry to be active in fighting for the real sector and investment that in turn will spur Indonesia’s economic growth,” Finance Minister Agus Martowardojo said.

Highlights of the new regulations include removing the value added tax (VAT) for the sales of houses worth less than Rp 70 million (US$7,910) compared with the previous Rp 55 million; eliminating taxes on the sales of cooking oil and bulk cooking oil for the poor; and providing in advance 50 percent of the funds needed by the State Logistics Agency (Bulog) for the rice for the poor program.

Deputy Finance Minister Anny Ratnawati said the increase in the ceiling of VAT house sales exemptions would not necessarily affect state tax revenues because “it would support the broader industry of people’s housing”.

“This is an incentive for the property industry to increase the housing supply because the demand is high and we hope it will invigorate the investment climate in the industry. More supply and demand could compensate [for the potential lower income from taxes],” she said.

Ministry expert staff for state revenue Robert Pakpahan said that the VAT for houses was increased because of “high inflation and soaring construction and land prices”.

The country’s headline inflation reached a 21-month high of 7.02 percent last January mainly due to soaring food prices. Surging oil prices, which have also caused high inflation during the past few months, have caused the Finance Ministry to pay the VAT on cooking oil for the poor.

“The policy is expected to be an effective instrument in stabilizing cooking oil prices,” Robert said.

Agus said the government had allocated Rp 250 billion for the cooking oil program for the poor to “anticipate the impact of the possible surge in prices”. As for Bulog, the minister said the government would disburse Rp 7.5 trillion of the total Rp 15 trillion in funds for the rice for the poor program in advance.

“Normally Bulog would need to borrow before getting the money. Now they do not have to pay the high interest rates because we will disburse half of the budgeted funds in advance,” Agus said.

Another new policy will allow the faster processing of scrap customs and excise charges for certain items, including those for public needs as well as religious, cultural, social and donation activities.

Director general of customs and excise taxes Thomas Sugijata said it normally took more than two months to help those who asked for a scrap in import duties on specific items. “With the new policy, it could probably be done in 10 days.”

The February policy package:

1. Scrapping the VAT on houses worth up to Rp 70 million, an increase from the previous Rp 55 million.
2. Imposing the VAT on toll or contract manufacturing services and exported goods.
3. The government will be responsible for the VAT on cooking oil and bulk cooking oil for the poor.
4. Simplifying the process of scrapping customs and excise charges for public, religious, cultural, social and donation needs.
5. Easing the processing and supervising of imports and exports.
6. Giving Bulog 50 percent of the funds needed for the rice for the poor program in advance.