Posted on 21 May 2015
The Indonesian government has rejected applications for a tax holiday by three companies that it says failed to qualify for the incentive.
The companies are Caterpillar Indonesia, the local unit of the US-based heavy equipment manufacturer; Krakatau Osaka Steel, a joint venture between Indonesia’s Krakatau Steel and Japan’s Osaka Steel; and Krakatau Nippon Steel Sumikin, a joint venture between Krakatau and Japan’s Nippon Steel and Sumitomo Metal.
Under the government’s tax holiday program, companies that invest a minimum of Rp 1 trillion ($76.2 million) in five “pioneering” sectors — oil refining and basic petrochemicals; renewable energy; base metals; machinery; and telecommunications equipment — are exempted from paying income tax for a period of 10 years.
The government recently said it would increase the tax holiday period to 15 years to provide more of an incentive for investors to do business in the country.
Caterpillar is investing $150 million to build a plant in Batam, in the Riau Islands, for 200-ton dump trucks — to be used in the copper and gold mining industry, which should have qualified it for the tax holiday.
However, the government says it fails the criteria because a portion of the components for the dump trucks will still have to be imported, and there is only one buyer lined up.
“ It could get the tax holiday if it produces the other components in Indonesia,” Teddy C. Sianturi, the Industry Ministry’s director for machinery, said in Jakarta on Tuesday.
“It also only supplies to Freeport Indonesia,” he added, referring to the operator of the Grasberg copper and gold mine in Papua province.
Krakatau Osaka Steel and Krakatau Nippon Steel Sumikin failed to qualify for tax holidays because neither company is deemed to be operating in any of the pioneering sectors, said Industry Ministry official Harris Munandar.
