The Indonesian government plans to introduce its 3rd fiscal policy package, aimed at boosting investments in Indonesia, this month. Deputy Finance Minister Bambang Brodjonegoro said that it involves tax incentives (tax allowance and tax holidays). The government will also make it more attractive for foreign companies to re-invest profits in Indonesia. Coordinating Economic Minister Chairul Tanjung added that a dividend tax exemption for both domestic and foreign investors is possible, provided that dividend is re-invested in Indonesian assets.
Brodjonegoro added that those companies that organize training programs or research and development programs for their workers are eligible to obtain tax incentives as this will enhance the Indonesian workers’ skills and competitiveness.
This policy package is the third in a series that has been implemented since August 2013 when Indonesia was hit by serious capital outflows amid a period of extreme global uncertainty due to the looming end of the Federal Reserve’s quantitative easing program in combination with Indonesia’s widening current account deficit, high inflation and slowing economy. As a result, the benchmark stock index (Jakarta Composite Index) and rupiah exchange rate weakened significantly in the second half of 2013.
Details about this third policy package will be presented on our website after these have been announced by the government.