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Presidential candidates eye more tax on the rich, digital firms to raise revenue
All the candidates share a common plan to establish a new state revenue agency that requires the Finance Ministry to spin off and combine two of its revenue arms, namely the tax and customs and excise offices.
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Tax matters: A tax officer provides consultancy services on Sept. 1, 2020, at the regional chapter (KKP) of the Taxation Directorate General (DJP) in the Cicadas area of West Java’s capital, Bandung. (Courtesy of/Bandung tax office)
In order to turn their campaign promises into reality, the three presidential candidates have sought to boost state revenue by tweaking the country’s taxation policies, such as by targeting the country’s richest individuals, big tech companies and increasing the share of value added tax (VAT).
All the candidates share a common plan to establish a new state revenue agency that requires the Finance Ministry to spin off and combine two of its revenue arms, namely the tax and customs and excise offices.
However, their similarities end at this point, with each pair differing on which taxes they want to change and by how much.
Presidential candidate and the current Defense Minister Prabowo Subianto aims to increase Indonesia’s tax ratio to between 13 and 14 percent of gross domestic product (GDP) compared to the current administration’s 10.21 percent, which was realized last year.
Prabowo, who has chosen President Joko “Jokowi” Widodo’s son Gibran Rakabuming Raka as his running mate, proposed lowering the tax rate for people earning Rp 10 million (US$644.5) or lower per month, which in theory should give people more disposable income, allowing more consumption and thus higher value added tax (VAT).
Edy Slamet, who represents Prabowo’s campaign team told The Jakarta Post on Dec. 29, 2023, that the pair sought to lower the tax rate to 5 percent for people making less than Rp 120 million in annual taxable income. Currently, the threshold sits at Rp 60 million, meaning more income groups would be able to enjoy the lower rate, rather than paying the higher 15-percent rate.
The pair is also open to the idea of raising the non-taxable income (PTKP) threshold, which refers to the minimum amount of annual income that the government can exempt from income tax, and which could leave people with more disposable income.
