Jakarta offers tax holiday to boost car exports
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The government is driving local automakers to export more of their products by offering a tax holiday and tax breaks as part of its effort to cut the widening current-account deficit.
Industry Minister MS Hidayat said recently that the government was willing to provide tax incentives for business players, including carmakers, that could increase exports “significantly”.
“If we agree to give a tax holiday of, for example, 5 per cent, how much of a percent increase in exports can you [the carmakers] provide?” Hidayat said after meeting Indonesian Automotive Industry Association (Gaikindo) representatives whom he said had asked for tax incentives.
A tax holiday is defined as a government programme that allows companies to pay no or reduced tax for a period of time to help stimulate the economy.
The government gives income tax holidays to five pioneer industries base metal, oil refining and basic petrochemical, machinery, renewable energy and telecommunications equipment with a minimum investment of 1 trillion Indonesia rupiah (Bt2.9 billion), according to a 2010 government regulation on tax holidays.
Currently, only three companies have received tax holidays, and six more are in the pipeline, reported tempo co. The three companies are PT Unilever Oleochemical Indonesia, a subsidiary of consumer goods manufacturer PT Unilever Indonesia; PT Petrokimia Butadien, a subsidiary of major domestic petrochemical firm PT Chandra Asri Petrochemical; and oleochemical manufacturer PT Energy Sejahtera Mas, a subsidiary of Sinar Mas Group.
Another government sanctioned tax break reduces taxable income by up to 30 per cent of overall investments realised over six years, as stipulated in a 2011 government regulation on income tax allowance in certain businesses in certain areas. This tax allowance is given to selected labour-intensive businesses in remote areas with a minimum investment of 50 billion rupiah.
Cars are the third biggest non-oil-and-gas export in the country, after mining and agricultural products. In 2012, Gaikindo data recorded that 173,368 completely built up units and 100,122 completely knocked down cars were exported.
Indonesia’s total domestic and overseas car sales reached 1.12 million units last year, according to the data. The sales figure was slightly behind that of Thailand, the largest automaker in Asean, which had sales of 1.5 million units in the same period.
