In order to revive the labour-intensive textile industry, Indonesia’s investment Coordinating Board (BKPM) has proposed income tax cuts for the employees of textile companies. The board has talked to the Office of the Coordinating Economic Minister and the Finance Ministry suggesting reduction in employee’s income tax by as much as 50 per cent for at least five years. Indonesian Textile Association (API) Chairman Ade Sudrajat has welcomed the suggestions laid down for tax cuts but was of the opinion that it would benefit only the employees, not the businessmen.
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Azhar Lubis, Deputy Director for Investment Monitoring and Implementation, BKPM said, “It’s still a suggestion, but we hope they will grant it soon.”
The tax cut would be applicable to companies that export 50 per cent of their production and employ at least 5,000 workers. The incentive is expected to benefit the Indonesian textile industry’s cash flow. Falling demand combined with soaring material prices, rising electricity tariffs and illegal imports have prompted manufacturers of textile goods to lay off workers. At least 39,000 textile workers were dismissed in the first half of this year.
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The Indonesian Government is making concerted efforts to revive the labour-intensive industries since textile businesses have seen a decreased demand from within and outside the country against the backdrop of global economic uncertainty.
