Indonesian Investment Agency Mulls Tax Incentives For Foreign Investors

by Mary Swire, Tax-News.com, Hong Kong

29 August 2001

In the face of falling foreign investment, the Indonesian Investment Coordinating Agency is considering offering tax holidays to foreign investors in order to increase the country's competitiveness on an international level, it was revealed recently.

Foreign investment in Indonesia has been falling since 1997, when the amount recorded was $33.8 billion, and it was revealed recently that for the first seven months of this year, the figure was a mere $5.5 billion. The chairman of the IICA, Theo Tumion, believes that other countries offer more efficient regimes and more attractive incentives, and is determined to do whatever is necessary to attract the attention of foreign investors. 'I will take radical and revolutionary policies to boost the realisation of foreign investment in Indonesia...including the provision of tax holidays,' he stated earlier this week.

The country has experimented with offering tax holidays as an investment incentive in the past; the provision for sparing foreign investors from tax for a certain period was initially scrapped in 1994, only to be reintroduced in 1996, and scrapped again in early 2000. However, this time, Mr Tumion seems to be holding firm on the issue, and will be pushing it forward as a matter of some urgency: 'I will discuss this plan with the Finance Ministry and other related institutions,' he promised. 'We have to complete in this matter of investment.'

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