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Economy in brief: Govt cuts tax for SMEs to 0.5%
The government has reduced income tax for small and medium enterprises (SMEs) from 1 percent to 0
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span>The government has reduced income tax for small and medium enterprises (SMEs) from 1 percent to 0.5 percent to support the development of their businesses.
Under Government Regulation No. 46/2013, SMEs with a turnover of up to Rp 4.8 billion (US$340,714) annually were required to pay 1 percent income tax.
President Joko “Jokowi” Widodo in an official statement said that during his visits to various regions, several residents complained of the regulation, which they said was a burden on SMEs.
“I asked the finance minister and the director general of taxation to calculate tax revenue from micro, small and medium enterprises, and work out how much we could relieve their burden. After calculations, we arrived at the figure 0.5 percent,” Jokowi said during a visit to East Java on Friday.
Jokowi said he had signed on Thursday a revision to the regulation to reduce the annual income tax rate for SMEs. The revised regulation will be effective starting July 1.
The president further said the tax cut for SMEs was hoped to support them, “So that micro [businesses] can grow to become small businesses. And small businesses can also grow to become medium businesses. Medium businesses can grow to become a large business. That’s what the government wants,” he said.
The decision was made after a cabinet meeting in March, during which Jokowi proposed income tax for SMEs to be reduced to 0.25 percent, which Finance Minister Sri Mulyani Indrawati said was too low.
Previously, the Indonesian Chamber of Commerce and Industry (Kadin) lauded the move, chairman Rosan Roeslani said it would boost the growth of SMEs. Rosan said the tax cut was a proposal made by the chamber.
