Indonesia proposes 100% income tax exemption for tourism sector

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Indonesian tourism minister Wishnutama Kusubandio has proposed a full exemption from corporate income tax for all firms in the tourist and creative economy sectors, as well as the provision of additional working capital loans, to aid the hard-hit industry during the global health crisis.

Wishnutama said he was currently in talks with Finance Minister Mulyani Indrawati regarding the proposal. The tourist sector is currently eligible for a 30% discount on corporate income tax to cushion the COVID-19 pandemic impact, according to a Jakarta Post report.

“We have proposed an additional tax cut of PPh Article 25 [corporate income tax] from the previous 30% to 100%. However, it is still under negotiation with the Finance Minister,” he said.

The minister also proposed to increase the limit for working capital loans from state-owned banks for tourism businesses from the current cap of Rp 10 billion (US$684,000), adding that the plan was being discussed with the Finance Ministry and the Association of State-Owned Banks (Himbara), says the Jakarta Post report.

The government has guaranteed working capital loans worth Rp 100 trillion for micro, small and medium enterprises (MSMEs) that cover loans with a ceiling of Rp 10 billion and a tenor of three years, as part of the COVID-19 relief package, aside from loan restructuring.

So far, the government’s debt-restructuring program for pandemic-hit firms has led to Rp 124 trillion of restructured bank loans for tourism firms, while the restructured loans from the lending and multifinance sector amount to Rp 3.1 trillion, according to Wishnutama.

Indonesia’s tourist sector has seen its revenue dry up amid the COVID-19 pandemic, as fears of the disease and international border closures brought the industry into a screeching halt, says the Jakarta Post. According to Indonesian Hotel and Restaurant Association (PHRI) data, the pandemic had wiped out an estimated Rp 85 trillion of Indonesia’s tourism revenue as of mid-July.