Tax incentives needed to spur business growth, says analyst

The Jakarta Post, Jakarta

Incentives should be given to businesses to improve their productivity and increase their taxable incomes, an economist says.

Aviliani said increased production would ensure businesses ended up paying more tax, allowing the government to meet revenue targets.

Taxation director general Darmin Nasution estimated Wednesday revenues from taxes as of Dec. 22 would be at 97.5 percent of the Rp 371.7 trillion (about US$40.4 billion) government target.

Aviliani said incentives could be in a form of a reasonable postponement period for property and income tax payments. This would give companies time to grow, she said.

Medium-term increases in income tax and value-added taxes collected would eventually offset any immediate loss in government revenues, she said.

A new tax bill currently being discussed by the House of Representatives includes other incentives, including a tax cut of up to 30 percent during the first six months for every investment worth at least US$100 million.

President Susilo Bambang Yudhoyono has acknowledged the need to provide tax incentives to small and micro-scale businesses to allow them to benefit from the expected growth forecast for next year.

"Fiscal, monetary and banking incentives are demanded by all businesses," Yudhoyono said Thursday in Jakarta.

Aviliani urged the government to create policies to ensure the availability of raw materials and otherwise support local industry.

"The aim is to ensure normal flows of production from upstream to downstream."

She noted the government had been unable to secure raw materials for the timber industry after raids on illegal logging operations intensified during past months.
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