Income Tax Rates Reduction Expected by 2019

TEMPO.CO, Jakarta – The government’s plan to reduce income tax rate (PPh) as part of tax reform through laws is not expected this year. Andreas Eddy Susetyo, a member of Finance and Banking Commission of the House of Representatives (DPR), said that the plan could be achieved by 2019, at the earliest.

“This year, we are focusing on the deliberations on the revisions to General Taxation Law (KUP) and Banking Law,” he said on Tuesday, February 7, 2017.

Revision to Income Tax Law is part of revisions to the Taxation Law. The government and the parliament also plan to revise the laws on non-tax revenue (PNBP), value-added tax (VAT), the Financial Service Authority (OJK) and Bank Indonesia (BI).

The government wishes to reduce income tax rates in a bid to improve Indonesia’s global competitiveness. The rates of corporate income tax (PPh badan), for example, is currently set at 25 percent, an 8 percent margin compared to that of Singapore.

Yustinus Prastowo, Director Executive of Center for Indonesia Taxation Analysis, argues that the government should not always rely on revisions to taxation laws. According to him, the Ministry of Finance could be more creative through the instrument of government regulations or regulations of the ministry of finance.

“For example, by increasing the limit of nontaxable income like last year that boosted purchasing power,” Yustinus said.

Yustinus said that tax rates should not be the main focus of tax reform. He pointed to developed countries who remain competitive despite imposing high income taxes.

He said that business owners expect better integrity and tax services from officials.

The Ministry of Finance Sri Mulyani Indrawati said she could not comment on the tax reform.

Sumber:, 08 Februari 2017

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