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Tax breaks, job training to combat virus impacts
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It’s oh so quiet: A mall in Senayan, Central Jakarta, is relatively empty of customers as retail businesses face the adverse effects of the COVID-19 coronavirus. The global epidemic is putting the resilience of Indonesia’s economy to test. (JP/Dhoni Setiawan)
T
he government is speeding up the disbursement of training funds for workers on top of announcing individual and corporate tax breaks, as well as relaxing import restrictions to cushion the economy from the COVID-19 pandemic.
Presidential Regulation No. 36/2020, issued last week, will expedite the government’s preemployment card initiative, which will subsidize training programs for laid-off workers, Office of the Coordinating Economic Minister secretary Susiwijono Moegiarso said on Thursday.
The program will be launched in the fourth week of March in three regions whose tourism businesses have been severely affected by the drastic drop in Chinese tourists, namely Manado in North Sulawesi, Bali and the Riau Islands. It was previously slated for launch next month in Greater Jakarta.
“In line with the President's [Joko ‘Jokowi’ Widodo] instructions, we will launch the preemployment cards in the fourth week of March. Why? This is part of our effort to combat COVID-19,” Susiwijono told reporters in Jakarta.
On Wednesday, the government announced more economic stimulus to minimize the negative impacts of the COVID-19 pandemic in Indonesia, including individual and corporate tax breaks, as well as the relaxation of import restrictions.
Finance Minister Sri Mulyani Indrawati said workers in the manufacturing industry would not have to pay income tax for six months, while companies would be able to defer their income taxes and import duties for the same length of time. Reimbursement of overpaid taxes would also be expedited.
“This is all targeted so that industries can get space in the extremely tight situation. Their burden will really be minimized by the government,” Sri Mulyani told reporters in Jakarta after a coordination meeting.
Moreover, hundreds of goods previously restricted for import would be allowed, and the Food and Drug Monitoring Agency (BPOM) would be simplified, she added.
Manufacturing industries have complained of disruptions in the supply of raw materials that have crippled factories across Indonesia. Twenty to 50 percent of raw materials for the country’s industries are sourced from China, Indonesia’s biggest trade partner.
Sri Mulyani said that the government planned to reduce the number of restricted import goods by up to 50 percent to spur business activities that had been hurt by the COVID-19 pandemic. As many as 749 harmonized system (HS) codes are to be scrapped, she added.
“This aims to ease the importation of raw materials amid the spread of the coronavirus,” she explained.
Items included in the list of restricted import goods include ceramics, soybeans, corn, textiles and textile products, vaccines, health equipment, telecommunication tools and equipment, footwear and food supplements, among many others, according to the Customs and Excise Office website.
The government is to also relax regulations related to the BPOM, Sri Mulyani said without giving more details.
Industry Minister Agus Gumiwang Kartasasmita said the stimulus involving import taxes was intended to help industries meet their needs for raw materials.
“This is related to the import duty for raw materials. In principle, we have already agreed on how much it will cost,” Agus said, while declining to provide the figure. “We will decide the new economic package in the next few days.”
Coordinating Economic Minister Airlangga Hartarto said the government was finalizing the supporting regulations to enact the policy.
“We hope to implement the stimulus package in April after preparing the legal background,” Airlangga said after the same coordination meeting.
The government in February introduced its first Rp 10.3 trillion (US$717.87 million) fiscal stimulus package to support the tourist industry and improve consumer spending to counter the economic impacts of the coronavirus outbreak.
Bank Indonesia has predicted that weakening economic activity, especially tourism, exports and imports, will drag down the country’s economic growth to 4.9 percent.
Sri Mulyani said she estimated that the COVID-19 disruption could shave 0.6 percentage points of the growth off gross domestic product (GDP). Indonesia’s GDP grew 5.02 percent in 2019, the weakest in four years.
Yustinus Prastowo, the executive director of the Center of Indonesian Taxation Analysis (CITA), said the government could afford to widen its budget-deficit-to-GDP ratio to its self-imposed threshold of 3 percent to provide fiscal room to contain any potential shock stemming from the COVID-19 pandemic.
“Right now economic growth needs to be prioritized at the cost of tax revenue, but state budget credibility needs to continue to be maintained because it’s important,” Yustinus said.
Business players welcomed the government’s fiscal incentive.
“Nonfiscal incentives are also needed in the form of facilitation of debt restructuring. There needs to be a macroprudential policy correction so banks can lend easier,” said Shinta Kamdani, Indonesian Chamber of Commerce and Industry (Kadin) vice chairwoman for international relations. (est)
