American investors ask government to lower tax hurdles

Urip Hudiono, The Jakarta Post, Jakarta

The government could do more to improve Indonesia's tax system in order to attract more investment from the U.S., a business delegation from that country says.

Simplifying the tax structure and bureaucracy was more important than providing incentives in the form of tax breaks or lower tax rates, the U.S.-ASEAN Business Council said in a discussion Monday with Coordinating Minister for the Economy Boediono.

Among the problems investors were currently facing was the complexity of the existing luxury sales tax on cars, as PT Ford Indonesia president Richard Baker highlighted during the talks.

Baker suggested that the government simplify and clarify this tax so that investors in the automotive industry could more accurately assess the market potential of a particular production model having regard to the tax burden imposed on it.

The American auto giant -- the world's third largest by sales -- is looking into marketing small-engined cars in Indonesia, Baker told reporters after the discussion. Ford at present sells sport utility vehicles and sedans on the local market.

The government currently imposes luxury sales tax of between 10 and 50 percent on all cars, according to their engine type and capacity, passenger capacity, and the purpose for which the vehicle is to be used.

Problems relating to the Indonesian tax court system for settling tax-related disputes were also brought up during the discussion.

The delegation was particularly concerned about the lengthy and impractical procedures involved in obtaining tax-related documents, saying that reducing all this red-tape would undoubtedly help improve Indonesia's investment climate.

While tax incentives for investors in the form of tax breaks and lower rates was not specifically discussed, Robert Foye from the Coca-Cola Company suggested that the government consider lowering the current sugar import duties so as to help make production more competitive on the regional market.

Boediono, wrapping up the discussion, said his ministry would consult with the finance minister on the matters raised.

The House of Representatives is currently deliberating government-proposed amendments to the tax, labor and investment laws as part of the efforts to attract more investment.

Boediono acknowledged that much still needed to be done, but warned that change could not happen overnight. However, he stressed that the government was committed to improving the situation.

The U.S.-ASEAN Business Council represents the interests of U.S. firms operating in the South Asian region, and holds regularly meetings with officials and business counterparts.

Representatives of some 21 American companies attended Monday's discussion, including oil firms ExxonMobil, Chevron, and ConocoPhillips, energy companies McDermott and General Electric, mining firm Freeport, agricultural companies Monsanto and Cargill, and information and communications firms Qualcomm and Oracle.

The meeting comes after Vice President Jusuf Kalla visited the U.S. late last month, inviting businesspeople there to invest more in Indonesia.

The Council's president, Matthew P. Daley, said the U.S. was particularly interested in developing better economic and development ties with Indonesia following the democratic achievement made here recently.

"What is needed now is the government laying out the right policies, and we think it has, with its focus on developing health, education and infrastructure," he said.
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