Government plans tax incentives for smelter projects

The government is considering to provide tax incentives, possibly in the form of tax holiday or tax allowance, to investors developing domestic smelters, said Director General of Mineral and Coal R. Sukhyar on Wednesday.

?The Ministry of Industry has submitted (the proposed tax incentives) to the Ministry of Finance. There are two fiscal incentive options: tax holiday or tax allowance,? he said.

The government is currently revising Government Regulation No 52/2011 on tax allowance. There are several factors that must be met by investors to be eligible to the tax allowance facility including in terms of size of investment, job creation, transfer of technology, and global as well as domestic industry condition.

Minister of Finance Bambang Brodjonegoro said that the government has reached the final phase in the revision process.

The government is pushing for the development of mineral downstream industry by pushing miners and investors to develop domestic smelters following the introduction of mineral ores export ban policy in January of last year. The government hopes several key domestic smelters projects to be ready by 2017.

Progress of proposed smelter projects, however, remains slow, except for certain nickel smelters in Sulawesi, due to a number of lingering obstacles such as lack of electricity and other supporting infrastructure facilities.

Investors have also demanded for incentives, given the small margins of smelters, and the high investment requirements especially that crucial infrastructure facilities including power are lacking in the remote areas where the mineral deposits are located. (*)