JAKARTAGLOBE.BERITASATU.COM | 7 April 2016
Jakarta. The Indonesian government’s latest tax incentives have been met with a lukewarm reception from employees, arguing they see minor benefits with regard to their purchasing power amid prospects of price increases and concerns about stagnant savings.
The government would waive income taxes on the first Rp 54 million ($ 4,100) of a taxpayer’s annual income this year, an improvement from the previous cap of Rp 36 million.
It is expected that Indonesians, who earn, on average, the equivalent of $3,400 annually, would  be able to allocate a larger chunk of their income for consumption to boost the economy.
While excited about the policy, some people say it might not be enough to change their spending habits.
“I might spend more, but not by much. I would only go to the shops more if prices are lower,” Vita, a 25-year-old employee in Jakarta, said on Thursday (07/04). She paid Rp 3 million in annual income taxes last year.
Jessica, another 25-year-old unmarried employee, said she still prefers to put her money into a savings account, rather than going on a shopping spree.
“It’s just going to be like last year, right? I still prefer saving my money and buy only the things I really like. But I think most Indonesians will shop more,” said Jessica, who reported Rp 2 million in income taxes last year.
Bank Indonesia’s latest survey showed consumer’s optimism slipped in March due to fears of price jumps before Ramadan, which will fall in June this year. Consumers were also expecting that their savings will not increase in the next six months.
The Finance Ministry estimated that the policy may accelerate Indonesia’s economy by 0.16 percent this year, helping it to achieve a growth of 5.3 percent as targeted by the government. Last year, the economy grew by 4.8 percent, its slowest pace in six years, due to declining exports.
Still, an observer said the government may overstate its projections on the tax incentive’s impact.
“This is just small change for some people,” said Yustinus Prastowo, executive director of Center for Indonesia Taxation Analysis.
A larger population at the lower end of the income scale would see no increase at all in their purchasing power, Yustinus added.
The number of people in Indonesia who live on less than one dollar a day rose to 28.6 million in September, from 27.7 million a year earlier, the latest data from the Central Statistics Agency (BPS) showed.
“I think it would be better for the government to offer cash transfers instead,” he said.
“I might spend more, but not by much. I would only go to the shops more if prices are lower,” Vita, a 25-year-old employee in Jakarta, said on Thursday (07/04). She paid Rp 3 million in annual income taxes last year.
Jessica, another 25-year-old unmarried employee, said she still prefers to put her money into a savings account, rather than going on a shopping spree.
“It’s just going to be like last year, right? I still prefer saving my money and buy only the things I really like. But I think most Indonesians will shop more,” said Jessica, who reported Rp 2 million in income taxes last year.
Bank Indonesia’s latest survey showed consumer’s optimism slipped in March due to fears of price jumps before Ramadan, which will fall in June this year. Consumers were also expecting that their savings will not increase in the next six months.
The Finance Ministry estimated that the policy may accelerate Indonesia’s economy by 0.16 percent this year, helping it to achieve a growth of 5.3 percent as targeted by the government. Last year, the economy grew by 4.8 percent, its slowest pace in six years, due to declining exports.
Still, an observer said the government may overstate its projections on the tax incentive’s impact.
“This is just small change for some people,” said Yustinus Prastowo, executive director of Center for Indonesia Taxation Analysis.
A larger population at the lower end of the income scale would see no increase at all in their purchasing power, Yustinus added.
The number of people in Indonesia who live on less than one dollar a day rose to 28.6 million in September, from 27.7 million a year earlier, the latest data from the Central Statistics Agency (BPS) showed.
“I think it would be better for the government to offer cash transfers instead,” he said.
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