ABSTRACT
The current level of investment in developing Asia is not sufficient to meet infrastructure needs. The gap between available financing and what is needed equals 2.4% of gross domestic product for 2016 to 2020. Most of the infrastructure funding in developing Asia is from the public sector. However, public sector funding is facing limited fiscal capacity as a considerable challenge. Therefore, private sector involvement is critical. In Indonesia, infrastructure development will accelerate economic development, and, in turn, the development of the country. It is estimated that in 2020–2024, Indonesia will need around 6.08% of its gross domestic product to finance infrastructure development. Despite the rapid rise of infrastructure spending, the state budget is only expected to fulfill 37% of the required amount. Therefore, it is crucial to attract private investment in infrastructure sectors by, among other mechanisms, providing fiscal incentives. This paper describes the tax incentives related to the infrastructure sector in Indonesia and evaluates the effectiveness of the incentives based on their utilization.
