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Tax Holidays for All, Local Business Urges
Faisal Maliki Baskoro | August 31, 2011

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A key business figure has called for across-the-board tax breaks to help local industry compete against imports rather than limiting incentives to a few key industries.

Suryo Bambang Sulisto, chairman of the Indonesia Chamber of Commerce and Industry (Kadin), said all sectors should be given access to tax holidays and there should be no limit to the size of investment to qualify.

“The important thing is using that promise as a sweetener to lure in as much as investment as we can or it will run to other countries,” he said on Friday.

Southeast Asia’s largest economy has been trying to lure more investment to boost economic growth. The government’s tax holiday package would be granted on investments worth at least Rp 1 trillion ($120 million) and be limited to five sectors: base metals, oil refining, petrochemicals, renewable energy, machinery or telecommunications equipment.

The tax holiday will exempt investors from paying taxes for up to 10 years from the start of commercial operations.

Suryo said that among sectors that could use the tax incentive to lure investment were energy, food, and infrastructure.

He also said the government needed to increase protectionist policies to local industries as imports grew bigger.

“The amount of potential loss from a tax holiday is small compared to the size of the investment, boost to the labor force and other trickle effects,” he said.

Suryo called for measures to limit imported goods to protect domestic manufacturers. He offered no plan to resolve the widening trade deficit.

According to the Central Statistic Bureau (BPS), imports to Indonesia totaled $83.6 billion in the first half of this year, up 33 percent from the same period last year. Imports from China in the first half was $12 billion, a 33 percent increase.

“From textiles to food, from China to Malaysia, our market is flooded with imported goods, while our industry is not growing fast enough to meet local demand,” Suryo said.

Natsir Mansyur, a deputy at Kadin in charge of logistics, said that Indonesia made it too easy in opening its markets for shipments of goods, making the nation become reliant on imports.

Indonesia imported $5.4 billion of food in the first half, compared to $4.7 billion in the same period last year. Commodities including cocoa, sugar, meat, salt, rice, corn, soy were all imported in large amounts to meet local demand.