Thursday, January 04, 2007

Tax incentive & efficacy

In a bid to boost investment, government launched a new tax incentive where certain projects and/or in certain areas will enjoy tax income break. But based on various surveys by different organizations, income tax is not an issue. Investors are willing to pay tax, but all they need is certainty and eradication of under the table payments.

This is not the first time government offers tax incentive. Back in 90s, Soeharto administration once offered tax holiday to certain projects. Kiani Kertas (that time controlled by Soeharto's golf buddy Bob Hasan), Tuban Petrochemical (controlled by Hashim Djoyohadikoesoemo, younger brother of Soeharto's son-in-law Prabowo Subianto), and Texmaco Perkasa Engineering (owned by Marimutu Sinivasan, one of Soeharto's favourite businessman) were among the receipients of tax holiday. But all of these projects almost bankrupt and even until now are struggling after almost 10 years. And most important, the facilicy failed to attract significant FDI.
Antara reported that nine types of investment would be eligible for tax income incentive. Investment in palm oil/cooking oil in Sulawesi, corn mills in Sulawesi, fish processing in Sulawesi, Maluku, and Papua, sugar plants outside Java, and cement in Papua are among them.
I'm not saying this is a kind of wrong medicine. I just sense the reemerging of cronyism in selecting companies which eligible to get.

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