Indonesia plans to reduce corporate income tax

06, Sep. 2019

JAKARTA, VNA - The Indonesian government plans to gradually lower corporate income tax to attract more investment and boost the country’s cooling economic growth.

The Jakarta Post quoted Finance Minister Sri Mulyani Indrawatias saying that the plan will be incorporated in a tax bill currently being discussed by the government before it is brought to the House of Representatives.

The bill, containing taxation provisions and facilities to strengthen the economy, would amend the current Income Tax (PPh) Law, Value Added Tax (PPN) Law and the General Taxation System (KUP) Law. It would complement other policies aimed at removing barriers to investment and trade.

Speaking to the press on September 3, the minister said the current rate of 25 percent will be trimmed to 20 percent, adding that the country willstart lowering the tax in 2021.

The former World Bank managing director said President Joko Widodo and Vice President Jusuf Kalla had given directions to ensure the cut would not put pressure on the state budget and would stimulate the economy.

Indonesia’s economy grew only 5.05 percent in the second quarter, its slowest pace in the last two years, amid softening investment and falling exports.

The government is also mulling charging publicly listed companies a much lower income tax, Sri Mulyani said.

The rate could be 17 percent, especially for companies that are new at the bourse so they can get a 3 percent lower rate for a period of five years, she added.

Finance Ministry Taxation Director General Robert Pakpahan estimated there would be a 87 trillion Rp (6.11 billion USD) loss in state revenue if the corporate income tax is cut to 20 percent in 2021, when the new tax rate is expected to be enforced.

However, if the tax rate is cut to 22 percent in 2021 before being lowered again in 2023 to 20 percent, he expected the measure to only incur a 52 trillion Rp loss in taxation revenue during the two-year period. - VNA