Jakarta – Indonesian officials and businessmen have welcomed the government's plan to abolish the unpopular exit tax next year, saying it would facilitate business expansion overseas.

Trade and Industry Minister Rini Suwandi said it would encourage business travel and promote trade. "So far, the departure tax has discouraged business people from promoting trade abroad," she told reporters during a press luncheon on Thursday.

Mr Erman Radjaguguk, deputy Cabinet secretary in charge of legislative drafting, said the tax was being dropped because it had failed to achieve its original goal – discouraging Indonesians from travelling overseas.

The levy, introduced in 1979, was quadrupled to one million rupiah (S$185) for air travellers in 1997. Those travelling by sea pay 500,000 rupiah and those by land 200,000 rupiah. Both foreign residents and locals are required to pay the tax when flying out of the country.

Indonesian businessmen travelling on an official trade mission with government officials are exempt from the tax, as are diplomats and members of sporting and cultural missions.

Mr Chris Kanter, deputy chairman for investment, transportation, information, telecommunications and tourism at the Indonesian Chamber of Commerce (Kadin), backed the move.

"The scrapping of the tax may not be really significant for big businesses, but it will make a major difference for those in small and medium enterprises," he told The Jakarta Post.

He added that the exit tax issue was a regular source of complaint from businessmen in the tourism sector, especially those who wished to attend bilateral and regional meetings.

"The government's plan would certainly help those in the tourism industry to develop their businesses. Not to mention that airline tickets to foreign countries are now quite cheap ... even cheaper than the tax," he said.

The secretary at the Directorate-General of Taxation, Mr Djazoeli Sadhani, said his office was currently examining both the positive and negative aspects of the government's plan. "The revenue we get from departure tax is really huge and goes towards helping to develop this country," he said.

He said the exit tax brought in almost 1.2 trillion rupiah in 2003. Although the tax can be claimed back, few people do so, said Mr Djazoeli.