Indonesia hands out tax holidays to attract industry investment

[JAKARTA] Indonesia will give tax holidays to new companies investing at least one trillion rupiah (S$98.6 million) across a wide range of industries, hoping to kickstart an economy growing at its slowest pace in over five years.

Chemicals, machinery, maritime transport and upstream oil and gas companies will get lower taxes for between five years and 15 years, Finance Minister Bambang Brodjonegoro told reporters in Jakarta on Thursday. Tax reductions will be between 10 per cent and 100 per cent, he said.

President Joko Widodo brought in new trade and economics ministers in a reshuffle on Aug 12 aimed at improving coordination and policy making in South-east Asia's largest economy. Growth slowed to 4.67 per cent in the second quarter from a year earlier, as exports and private consumption slowed.

The Jakarta Composite Index extended gains to 3.8 per cent after the tax plans were announced. The rupiah was up 0.3 per cent by 1.43 pm in Jakarta, according to prices from local banks. The currency is the second-worst performer against the dollar in Asia this year and the stock market has fallen more than 15 per cent.

On Aug 20, Mr Joko, better known as Jokowi, ordered the cabinet to conduct a major deregulation to improve the investment climate. Telecommunications companies will be able to apply for a tax holiday with at least 500 billion rupiah investment, Mr Brodjonegoro said.

BLOOMBERG