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Jakarta Post

Full salary: Manufacturing workers freed from six-month income tax burden

  • Adrian Wail Akhlas

    The Jakarta Post

Jakarta   /   Thu, March 12, 2020   /   09:29 am
Full salary: Manufacturing workers freed from six-month income tax burden Workers complete the production of knitwear at Rajong Binong Jati Center, Bandung, West Java, on March 6. The Indonesian Textile Association (API) has stated that due to COVID-19, the textile industry and textile products have been constrained by the supply of raw materials and machine parts for the garment industry. (Antara/Raisan Al Farisi)

Workers in the manufacturing industry will not have to pay income taxes for six months as the government has announced measures to shield the economy from weakening economic activity against the backdrop of the coronavirus pandemic.

Finance Minister Sri Mulyani Indrawati said the move to temporarily exempt manufacturing workers from income tax payment (PPh 21) took aim at relieving workers' burden caused by the pandemic. Manufacturing industries have complained of raw material supply disruption that has crippled factories across Indonesia.

Twenty to 50 percent of raw materials for the country’s industries are sourced from China, Indonesia’s biggest trade partner.

"This aims for all industries to have [breathing] space in this tight situation," Sri Mulyani told reporters in Jakarta. "Their burden is being minimized by the government."

Sri Mulyani said the government was also set to delay import tax, corporate income tax as well as expedite overpaid tax repayment in the second stimulus package. She, however, declined to say how much revenue the government was expected to lose from the new stimulus package.

The minister has warned that economic growth could weaken to 4.7 percent this year from 5.02 percent in 2019 amid increasing business disruptions caused by the pandemic. Meanwhile, Bank Indonesia (BI) has said that it was likely to trim economic growth outlook in 2020 at this month's board of governors meeting on March 18 and March 19.

[RA::BI expects Q1 economic growth to drop to 4.9% as virus hurts tourism, trade]

The government collected Rp 103.7 trillion in state revenue in January, down 4.6 percent from the same month last year. It collected Rp 84.7 trillion in taxes, down 6 percent compared to the same period last year.

Meanwhile, government spending reached Rp 139.8 trillion, down 9.1 percent, from the same period last year. It resulted in a budget deficit of Rp 36.1 trillion, 0.21 percent of gross domestic product (GDP) in January.

Economists have predicted that the fiscal deficit could soar this year as the government spends more to cushion the negative effects of the coronavirus but at the same time state income will be lower than expected as business activities weaken amid the pandemic.

Read also: Battered by virus: Businesses across Indonesia feel the pinch

The government introduced a Rp 10.3 trillion (US$717.87 million) fiscal stimulus package to support the tourist industry and improve consumer spending to counter the economic impacts of the coronavirus outbreak.

The World Health Organization (WHO) declared the coronavirus a new pandemic on Wednesday as it had shuttered factories, disrupted travel and supply chain, delayed conferences and sporting events and infected more than 120,000 people worldwide. More than 4,300 people have died.

Indonesia announced its first death from the novel coronavirus on Wednesday as 34 individuals had tested positive for COVID-19 in the country.