Super Deduction Tax is “Ammunition” to Increase Palm Oil Downstream Innovation
Downstream is a weapon for the palm oil industry to become the locomotive of the national economy and create bigger “economic cake” such as optimizing export foreign exchange from downstream products that have high economic value, substitute imported products, and create multiplier effects (job creation and income generate) which bigger and more sustainable.
This is indicated by the export performance of downstream products, especially palm-oil-based oleochemical products, which increased in value and volume reaching 3.8 million tons with a value of USD 2.6 billion amid the pandemic and global economic recession in 2020. The export of oleochemicals was driven by high demand for hygiene products from the global community during the pandemic such as soap, detergent, hand sanitizer to disinfectant.
Another proof of palm oil’s downstream product that can provide multiple benefits for the Indonesian economy is palm oil biodiesel. The use of biodiesel can reduce the use of imported diesel, thereby saving in imported foreign exchange which has implications for reducing the oil and gas balance deficit. Not only that, the biodiesel industry is also able to increase added value, absorb labor and reducing GHG emissions.
The various benefits of the activities and products generating from the palm oil downstream more encourage innovation in optimizing the potential of oil palm, both its oil (including its phytonutrient content) and plant body parts (biomass) such as trunk, empty fruit bunches, shells, fiber, frond and others become a product with high added value and economic value. Therefore, to accelerate downstream palm oil industry, the Indonesian Government issued various policies such as export taxes (export duties and export levies) and tax incentives for downstream industries.
One form of tax is the Super Deduction Tax. This fiscal regulation is stipulated in Government Regulation No. 45/2019. The tax incentive aims to encourage independent research activities in the industrial sector.
In a webinar organized by Majalah Sawit and APOLIN, Emil Satria as Director of the Forest and Plantation Products Industry of the Ministry of Industry of the Republic of Indonesia explained that the Super Deduction Tax can support the development of downstream oil palm in Indonesia.
Based on his explanation, Super Deduction Tax incentives are given to research and development (R&D) institutions that are taxpayers and fulfill the following criteria, among others, aiming at acquiring discoveries and creating something that can be freely transferred or traded in the market.
In the attachment of Minister of Finance Regulation 153/2020, there is a focus and theme of R&D which is the object of providing tax incentives, where the downstream palm oil industry is included in the focus of R&D for food, pharmaceuticals and cosmetics, agro-industry, and energy that have the opportunity to receive these tax facilities.
In this Minister of Finance Regulation, particularly in Article 2, the amount of the tax incentive facility is a reduction in gross income for a maximum of 300 percent. The details of this incentive are a reduction in gross income by 100 percent of real costs incurred for R&D activities, and an additional reduction in gross income for a maximum of 200 percent of the accumulated costs incurred for R&D activities within a certain period (consisting of: 50 percent which generates Intellectual Property Rights (Patent or PVT) that are registered domestically; 25% which generates Intellectual Property Rights (Patent or PVT) which are not registered domestically but registered abroad; 100% if the innovation research has reached the commercialization stage; and 25% if the R&D is carried out in collaboration with government R&D institutions, and/or higher education institutions in Indonesia).
In addition, R&D costs that can be provided by the facility consist of: (1) cost of assets other than land and buildings; (2) cost of goods and/or materials; (3) salary, honorarium, or similar payments paid to employees, researchers and/or engineers employed; (4) costs of obtaining Intellectual Property Rights (Patent or PVP Rights); and (5) remuneration paid to government R&D institutions and/or higher education institutions in Indonesia.
The Super Deduction Tax is a government’s commitment to encourage and accelerate the development of downstream palm oil industry in Indonesia, as well as their attention to R&D institutions that have the role as creators, innovators, and the backbone of the palm oil industry.
Support and synergy between palm oil stakeholders (government, researchers, and industry) is ammunition in developing innovative and competitive palm oil-based downstream products in domestic and global markets. Thus, it’s hoped that the palm oil industry will become stronger as a “mine and a locomotive” that produces a bigger “economic cake” for Indonesian people.
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