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Taxable income adjustment next year

Finance Minister Agus Martowardojo said that regulations to increase non-taxable income thresholds could be issued by the end of August but the policy might only be implemented next year

Hans David Tampubolon (The Jakarta Post)
Jakarta
Fri, August 24, 2012

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Taxable income adjustment next year

F

inance Minister Agus Martowardojo said that regulations to increase non-taxable income thresholds could be issued by the end of August but the policy might only be implemented next year.

Separately, head of Indonesia’s tax inspectorate, Fuad Rahmany, told reporters that increasing non-taxable income thresholds would require a massive amount of administration.

“Administrative work is required, not only from the taxation office but from taxpayers. A lot of readjustments are needed to comply with the new regulations,” Fuad said.

The idea of increasing the threshold rate came from President Susilo Bambang Yudhoyono.

Yudhoyono suggested that the PTKP rate be increased from Rp 15.8 million (US$1,664.21) per year to Rp 24 million. A person who earns around Rp 2 million monthly will not have to pay tax.

Yudhoyono said that the government wanted to ease tax pressures on low earners. In doing this, the President hoped to maintain purchasing power stimulate domestic consumption, mitigating the impact of the global crisis.

Indonesia is relying heavily on its massive population and substantial domestic consumption to maintain growth during the global downturn. The government has set a target of 6.8 percent of growth in the 2013 state budget bill.

Meanwhile, the deputy chairman of House of Representatives Commission XI on banking and finance, Harry Azhar Azis from the Golkar Party, foresaw no problems if the government wanted to implement a policy on tax thresholds next year.

“We understand that it will be difficult for the government to fully implement the increase in non-taxable income this year. So, we have no problem at all if the policy is set to be implemented next year,” Harry said.

Harry said that the most important thing the government could do right now was consult with the House on the policy.

“As of now, the Finance Ministry has yet to consult with us to discuss this planned policy,” Harry said.

Harry said that the House would particularly like to discuss the level of the tax threshold.

“I personally want the non-taxable income rate to be increased to Rp 36 million per year,” Harry said.

“We understand that the higher the non-taxable income rate, the higher potential income tax loss that we might suffer. However, by applying a higher non-taxable income rate, we might be able to push for more purchasing power in our economy,” Harry said.

The finance ministry had previously said that if the level was set at Rp 24 million per year, potential tax losses for the country could be as much as Rp 12 trillion.

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