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View all search resultsGovt plans ‘fairer’ tax split, giving revenue to workers’ regions
Experts cautioned that the policy could unintentionally encourage companies to hire only workers who live nearby.
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Several office workers walk on a pedestrian bridge at Jl. Sudirman in Jakarta on June 7, 2024. (Antara/Reno Esnir)
T
he government is set to overhaul the revenue-sharing scheme for workers’ income tax (PPh 21), shifting the proceeds from the region where companies are based to the regions where workers actually live, a move aimed at creating a fairer distribution of funds.
For instance, workers commuting from satellite cities like Bogor and Bekasi in West Java currently have their income tax funneled to Jakarta’s coffers. Under the new plan, those tax revenues would instead be redirected to West Java, giving local governments more resources to support their residents.
In a virtual meeting with the Regional Representative Council (DPD) Commission IV on Sept. 2, Deputy Finance Minister Anggito Abimanyu said the ministry was “currently conducting an exercise to implement [tax] revenue-sharing based on workers’ domiciles.”
He noted that the new tax revenue distribution system would apply only to PPh 21. “Corporate income tax [PPh badan] won’t be shared, so the [tax] collection location does not affect revenue distribution,” he said.
According to the Finance Ministry, state revenue from individual income tax and PPh 21 is distributed to regions at a rate of 20 percent, while the remaining 80 percent goes to the central government.
Of the regional share, the revenue-sharing funds (DBH) collected from PPh 21 are distributed with 8 percent going to the province and 12 percent to the city or regency.
Fajry Akbar, research manager at the Center for Indonesia Taxation Analysis (CITA), cautioned that the policy could unintentionally encourage companies to hire only workers who live nearby, ensuring that tax revenues flow back to their own regions.
