Indonesia plans to cut property taxes to stimulate economy

(Jakarta) REUTERS: Indonesia plans to cut taxes on luxury properties and revise other tax rules in a bid to support the real estate industry and attract investment in Southeast Asia’s biggest economy, Finance Minister Sri Mulyani Indrawati said.

The threshold for a luxury tax of 20 percent applied to houses and apartments would be raised to at least 30 billion rupiah (US$2.06 million) from 20 billion rupiah, she said in comments published on the cabinet secretary’s website late on Wednesday.

Sales of luxury property will also be subject to a lower tax of one percent of the selling price, against five percent now.

“We hope the business side of the construction sector will be boosted,” Indrawati said. She did not give a timetable and said the regulations were currently being formulated.

Indonesian policy makers have been keen to kickstart the country’s sluggish property sector in a bid to help lift an economic growth rate that has been stubbornly stuck at around five percent in recent years.

S&P Global Ratings warned on Wednesday that the finances of local real estate developers and state firms might deteriorate in 2019 due to risks rooted in general elections and a further depreciation for the rupiah currency.

Indrawati said the government is also considering other tax incentives to boost exports, such as removing valueadded tax (VAT) on some service exports, including accounting and legal, and cutting tax rates on time deposits for exporters.

The government also plans to encourage investment in resources by revising corporate taxes for coal miners, as well as re-examining mineral export duties and rules forcing investors to set up smelters, she said without elaborating.

Last week, Coordinating Minister for Economic Affairs Darmin Nasution said Indonesia will further ease its so-called “Negative Investment List” and open up previously partly closed business sectors to foreign ownership.

Foreign direct investment (FDI) in Indonesia fell for the second straight quarter in July-september from a year earlier.the country attracted 89.1 trillion rupiah worth of FDI in the third quarter, or around US$6.6 billion using the investment board’s rupiah exchange rate of 13,400 to the dollar.