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Tax office to issue regulation on tax incentive within days
The tax office is moving ahead with its plan to provide incentives for companies that cover, partly or entirely, their workers’ individual tax liabilities, and could issue a ministerial decree on the matter as early as this week
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The tax office is moving ahead with its plan to provide incentives for companies that cover, partly or entirely, their workers’ individual tax liabilities, and could issue a ministerial decree on the matter as early as this week.
Unlike in many countries, most companies in Indonesia cover their workers’ income tax.
Darmin Nasution, the Finance Ministry’s director general for taxation, said the regulation regarding the incentives, which was formulated to ease the burden on companies amid the ongoing financial crisis, would be introduced on Feb. 10 at the latest.
“We are running simulations to calculate tax incentives needed in each sector so that we know the proper allocations,” Darmin said following a hearing with the House of Representatives’ Commission XI on financial affairs.
The incentive will form part of the government’s fiscal stimulus plan totaling Rp 71.3 trillion (US$6.3 billion) launched in anticipation of the impacts of the deepening global economic crisis.
The Finance Ministry said the allocation for the incentive would amount to Rp 6.5 trillion.
Not all businesses will receive the incentive.
Businesses with good records of tax payment, and which are labor and export oriented will be more likely to receive the incentives.
“I cannot tell which sectors will receive the incentive just yet. We are still discussing it,” Darmin said.
The Indonesian Chamber of Commerce and Industry recently suggested the government does not provide such an incentive to labor-intensive industries as most of the companies’ employees there were low-wage workers, whose salaries were mostly below the taxable income threshold.
“On the other hand, if the incentive is aimed at the middle to upper workers, it will not do any good either especially if the companies use the extra money gained from tax cuts to buy imported goods,” University of Gajahmada economist Sri Adiningsih said Wednesday.
The country’s imports rose sharply last year to $128 billion from $74 billion in the previous year, cutting the trade surplus by 80 percent to $8 billion from $40 billion in 2007.
Sri said that other than giving incentives to urge people to consume, the government should also establish an effective way to promote domestic product consumption to cushion the impacts of weakening global trade.
“I am not saying that we should adopt protectionist policies, but there are other things the government can do to promote domestic products,” she said.
“The government can start cutting out the hassle in bureaucratic policies and improving on infrastructure to reduce the cost of production and improve the quality of the domestic products.”. (hdt)
