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Indonesia to offer tax incentives for investment

[JAKARTA] Indonesia plans to offer tax incentives to firms that re-invest profits into domestic operations instead of paying out dividends to overseas stockholders, the finance minister said, in a bid to boost investment in Southeast Asia's largest economy.

The tax incentives are part of a package of regulations the finance ministry is expected to approve by early April to encourage firms to expand in Indonesia.

President Joko Widodo, who took office in October, wants to spur economic growth from an estimated 5.1 per cent in 2014 to 5.8 per cent this year, mainly by relying on higher investment. "We hope the business world realizes that we don't only want to increase tax revenue, but we also want to give tax incentives because we need investment," Finance Minister Bambang Brodjonegoro told reporters.

The finance ministry plans also to offer longer tax holidays for companies investing at least 1 trillion rupiah (US$77.07 million) in renewable energy, basic metal, refineries, machinery or communication devices.

Companies establishing operations in special economic zones, such as Sei Mangkei in North Sumatra, will also receive increased tax incentives.

The finance ministry is expected to provide more details on the new tax package later this month.