The Indonesian government is in the midst of pursuing an ambitious new growth strategy, emphasizing investment over domestic consumption as a primary growth driver in the wake of depressed commodity prices, lagging household consumption and lower-than-anticipated government revenues.
This chapter examines Indonesia’s tax environment, focusing on changes to the tax system and regulations for potential investors. It also contains a viewpoint from Ay Tjhing Phan, Tax Leader, PwC.
Indonesia is transforming from a resources- and consumption-based economy to a more manufacturing- and investment-oriented one, working to build an industrial base that will allow it to reduce its dependence on imports and keep more value within the economy. Following his inauguration in October 2014, President Joko Widodo quickly took a number of vital and positive steps that so far are increasing opportunities for foreign direct investment.
On the cusp of 2014 national elections and the 2015 integration of the ASEAN Economic Community, Indonesia is poised to continue its rapid economic expansion. While the country’s natural resources are still plentiful, by channelling foreign direct investment into the right areas, the government is ensuring that true potential, in terms of value and manufacturing, is achieved.
Stretching over 17,500 islands and home to around 245m people, Indonesia is a vast, diverse nation with a rapidly growing economy, extensive natural resources and a range of sectors ripe for investment. By far the largest country in ASEAN in terms of both population and area, Indonesia is responsible for one-third of the 10-nation bloc’s total GDP.
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