The government will once again provide the public with tax break following its tax amnesty program. It is currently reviewing a plan to lower income tax rates and the possibility of establishing a tax haven, announced President Joko Widodo (Jokowi) during a tax amnesty information event at the Rama Shinta Grand Ballroom in the Patra Jasa Semarang Convention Hotel in Central Java, Tuesday (9/8) night. (Read: No Income Tax for Individuals Earning Under IDR 4.5 Million A Month)
He said the government will launch other tax laws following Law No. 11/ 2016 on the tax amnesty. These include revisions of the Value Added Tax (VAT) Law, Income Tax Law and the General Taxation Provisions and Procedures Law.
The president said that the House of Representatives (DPR) must discuss and approve the revision of these laws first. However, he is confident that lawmakers will support the government, as they did during talks over the Tax Amnesty Law despite delays due to political issues.
The government plans to lower the income tax rate for individuals in its revision of the Income Tax Law. Jokowi said Indonesia must lower income tax rates in order to compete with other countries. He believed many investors will be interested in investing in Indonesia if income tax rates are lower. (Read:Government Uses Geo-Tagging to Mark A Million Tax Potentials)
He said almost all countries are experiencing economic turbulence. Some countries have even seen their economic growth drop to 4 percent and even minus 3 percent. Economic growth in most of the countries near Indonesia has fallen 1-1.5 percent.
In light of this, it is no surprise that countries, including Indonesia, are currently doing everything they can to attract investors. Indonesia’s high income tax rate is one of the considerations of investors opting to invest in other countries.
Jokowi explained that Singapore applies a corporate tax of 17 percent compared to Indonesia’s 25 percent. He said it would be difficult for Indonesia to compete if its tax rate is still high because investors would choose to invest in other countries. (Read: Arcandra Reviews Proposal to Free Taxes for Oil and Gas Industry Before Production)
“Maybe lower the income tax from 25 percent to 20 percent first, then 17 percent,” said Jokowi. However, there is also a possibility that the government will lower the income tax rate all the way down to 17 percent right away if the government’s calculations allow it to do so.
The government is currently gathering input from many parties concerning this plan. “God willing, hopefully everything will be finalised by next year at the latest,” said the president.
As well as revising these three laws, the government is also looking into the possibility of converting one of Indonesia’s islands into a tax haven. Jokowi cited Labuan in Malaysia as an example for this plan. (Read: Bali, Batam and Bintan Have Potential to be Tax Havens)