New Economic Policy Package Will Be Released at the End of October
The government of Indonesia will release a second economic policy package at the end of October. This new package, which aims to provide attractive tax incentives to investors, is in addition to the package that was released in August 2013 when sharp rupiah depreciation and a rapidly falling stock index occurred as panic emerged after the Federal Reserve hinted at an end to its quantitative easing program. In combination with a widening current account deficit and high inflation, it resulted in large capital outflows from Indonesia.
The October package will contain various tax incentives (tax holiday and tax allowance) that aim to attract foreign investments. One example of a revision to Indonesia's tax holiday scheme involves the minimum investment amount. Currently, investments that meet a number of criteria are entitled to a tax holiday. One of these criteria is the minimum amount that needs to be invested. This amount is presently set at IDR 1 trillion (USD $88.5 million) but is expected to be tuned down to IDR 500 billion (USD $44.2 million). This information was given by the deputy minister of Finance, Bambang PS Brodjonegoro.
The government also wants to give more advantages to larger investments. Currently, a company that invests IDR 1 trillion receives the same advantages as a company that invests IDR 20 trillion. Through tax incentives, the government intends to give more benefits to the company that makes a larger investment.
Details about Indonesia's August package can be read here.
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