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Jakarta Post

Higher non-taxable threshold to spur growth

  • The Jakarta Post

    The Jakarta Post

Jakarta   /   Sat, June 27, 2015   /  09:24 am

A plan to raise the threshold of non-taxable income for individual taxpayers is set to help boost the public'€™s purchasing power that will eventually drive up economic growth by 0.1 percent, Finance Minister Bambang Brodjonegoro says.

Starting next month, individuals with annual incomes of Rp 36 million [US$2,700], or Rp 3 million per month, will be exempted from paying income tax, according to Bambang.

The threshold is an increase from the Rp 24.3 million annual income threshold set in 2012, after which the government slaps a 20 percent income tax on the lowest bracket.

Amid sluggish economic growth that had seen sales of motorcycles and cars plunge by double digits in the first five months of the year, the easing of taxable income is expected to help spur demand for more goods in a country that depends heavily on consumption to drive the economy.

'€œIt (the new policy) will help drive up the economy by 0.1 percent,'€ said Bambang on Friday.

Indonesia recorded a lackluster 4.7 percent growth in the first quarter, the lowest in six years, with the International Monetary Fund and the World Bank recently slashing their estimate about the growth to 4.7 percent for 2015.

Bambang explained that the easing of taxable income would lift demand for goods and create a multiplier effect that could drive the economy as the policy would enable households to have more disposable income that can be spent on consumption.

'€œHigher consumption will create demand. This will drive more business for companies, which will eventually invest more and employ more workers,'€ he said.

The Finance Ministry'€™s director general of taxation, Sigit Priadi Pramudito, said that the ease in the tax would cover income tax paid since January this year, meaning that individual taxpayers can file for tax deductions in their tax filings next year.

Companies can also receive tax deductions next year if they are paying the income tax of their workers.

The new policy also has implications for families. Married couples filing tax returns jointly, for example, will be entitled to more than Rp 50 million in non-taxable income.

'€œThe tax exemption of Rp 36 million annual income is for unmarried taxpayers. Those with spouses and children can have higher exemptions,'€ said Sigit. (ren)

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