JAKARTA: Indonesia on Tuesday (Jul 9) rolled out corporate tax breaks for labour-intensive industries and Research and Development (R&D) investments in a bid to create jobs in Southeast Asia's biggest economy.
They are part of a series of tax measures aimed at boosting investment and accelerating economic growth amid signs that the government's 2019 growth target of 5.3 per cent may be hard to reach.
President Joko Widodo has made developing Indonesia's human capital one of his main priorities after winning a second term in office in April.
Under the new regulations posted on Tuesday, a company can deduct from its taxable income 60 per cent of a new investment in or expansion of a labour intensive business.
Certain skills training is eligible for a deduction of two times the cost of such activities, according to the regulations posted on the website of the office of the cabinet secretary.
Companies can also deduct up to three times their research and development costs, an incentive to encourage innovation and the use of new technology.
The so-called "super deductible tax" incentives took effect immediately. The regulations also called for the finance ministry to issue further guidelines on how they are applied.
Indonesian Employers Association Chairman Hariyadi Sukamdani welcomed the tax measures but worried about incorporating them at a time when the government faces slow growth in tax collection.
Tax revenue grew a mere 2.4 per cent to 496.7 trillion rupiah (US$35.18 billion) in the January-May period compared to a year ago, finance ministry data showed, well off a 19 per cent target for 2019.