Most companies are passing up on the tax stimulus designed to boost employees' purchasing power, citing complex procedures as the main reason, the Indonesian Young Entrepreneurs Association (Hipmi) says.
The tax office has provided a tax incentive for those working in the agriculture, fisheries and manufacturing sectors, with a monthly salary of less than Rp 5 million (US$500).
The Rp 6.5 trillion government incentive went in to effect in March and runs until the end of the year.
Under the scheme, companies will give an additional income to their employees, equal to the income tax that previously should have been paid to tax office.
Procedures to apply for the incentive include the obligation to provide names of employees entitled to receive the incentive.
Hipmi chairman Erwin Aksa said companies considered the procedure complex and troublesome, compared to the amount of money received by employees.
"Many businesses don't want to be troubled with the issue," he said Wednesday.
"They're more comfortable with the current situation. It's not that we don't want to make use of the incentive - it's just that the result is not worth all that bureaucracy."
Erwin pointed out an employee with a monthly salary of Rp 5 million, who would only make an extra Rp 267,333.33 through the incentive.
Tax office chief Darmin Nasution admitted the stimulus had not run as expected, due to various reasons.
"We're still educating the public about it. We think there's two reasons *for its ineffectiveness*," he said Tuesday at a press conference.
"First, company leaders are worried employees will ask for *a similar* stimulus next year. Second, companies are asked to provide a list of their employees' salaries, whether they have tax numbers or not.
"Companies may worry this will be retroactive."
Darmin warned companies not to prevent their employees benefitting from the incentive, saying the tax office would punish such companies.
In March, the tax office said companies refusing to pay the tax incentive to employees would be fined at 100 percent of the total incentive.
