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Jakarta Post

Tourism Minister proposes further tax cuts, additional loans for hard-hit industry

  • Mardika Parama

    The Jakarta Post

Jakarta   /   Thu, July 23, 2020   /   04:46 pm
Tourism Minister proposes further tax cuts, additional loans for hard-hit industry A general view shows a near-empty beach in Kuta, Bali, on March 22 amid concerns about the COVID-19 outbreak. (AFP/Sonny Tumbelaka)

Tourism and Creative Economy Minister Wishnutama Kusubandio has proposed a full exemption from corporate income tax for all firms in the tourist and creative economy sectors, as well as the provision of additional working capital loans, to aid the hard-hit industry during the global health crisis.

Wishnutama said he was currently in talks with Finance Minister Sri Mulyani Indrawati regarding the proposal. The tourist sector is currently eligible for a 30 percent discount on corporate income tax to cushion the COVID-19 pandemic impact.

“We have proposed an additional tax cut of PPh Article 25 [corporate income tax] from the previous 30 percent to 100 percent. However, it is still under negotiation with the Finance Minister,” he said in a discussion held at the Coordinating Maritime Affairs and Investment Ministry on Wednesday.

The minister also proposed to increase the limit for working capital loans from state-owned banks for tourism businesses from the current cap of Rp 10 billion (US$684,000), adding that the plan was being discussed with the Finance Ministry and the Association of State-Owned Banks (Himbara).

The government has guaranteed working capital loans worth Rp 100 trillion for micro, small and medium enterprises (MSMEs) that cover loans with a ceiling of Rp 10 billion and a tenor of three years, as part of the COVID-19 relief package, aside from loan restructuring.

So far, the government’s debt-restructuring program for pandemic-hit firms has led to Rp 124 trillion of restructured bank loans for tourism firms, while the restructured loans from the lending and multifinance sector amount to Rp 3.1 trillion, according to Wishnutama.

Indonesia’s tourist sector has seen its revenue dry up amid the COVID-19 pandemic, as fears of the disease and international border closures brought the industry into a screeching halt. According to Indonesian Hotel and Restaurant Association (PHRI) data, the pandemic had wiped out an estimated Rp 85 trillion of Indonesia’s tourism revenue as of mid-July.

Foreign visitor arrivals to the country plunged by 86.9 percent year-on-year (yoy) in May to 163,646, according to Statistics Indonesia (BPS) data. From January to May, Indonesia recorded just 2.9 million foreign tourist visits, a 53.56 percent drop from the same period last year.

In total, the government has allocated Rp 695.2 trillion as part of its COVID-19 response. This includes Rp 120.61 trillion allocated by the government to provide tax relief for individuals and businesses affected by the pandemic.

Meanwhile, in addition to the financial stimulus, the government is also attempting to kickstart the industry by instructing government institutions and agencies to resume their business trips and set up meetings in tourist destinations.

The Coordinating Maritime Affairs and Investment Ministry issued a letter on July 6 instructing agencies and ministries under its leadership to spend their remaining business trip budget of Rp 4.1 trillion in eight designated tourist destinations starting from July to November.

The designated destinations are Banyuwangi, East Java; Bali; Borobudur Temple in Central Java; Toba Lake in North Sumatra; Riau Islands; Labuan Bajo in East Nusa Tenggara; Likupang in North Sulawesi; and Mandalika in West Nusa Tenggara.

“The business trips could help spur national economic growth and have a positive impact on the regions relying on tourism,” the letter reads.

In the same event, Coordinating Maritime Affairs and Investment Minister Luhut Pandjaitan encouraged stakeholders to boost domestic tourism in the third quarter of the year.

“Let’s work together to increase the number of domestic tourists by 70 percent in the third quarter,” he said.

He acknowledged that so far, more than 180,000 workers in the tourist sector had been affected by the pandemic, while an estimated 2,000 hotels have stopped operating.

PHRI chairman Hariyadi Sukamdani previously told lawmakers during a hearing on July 14 that the government’s tax incentives were not sufficient to stop the bleeding.

“Banks will need to extend the debt-restructuring program and they will need to provide working capital loans” to rescue businesses in the tourist sector, he said.

Read also: Pandemic erases $5.9b of Indonesia’s tourism revenue as businesses seek help