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Jakarta Post

Indonesia set to delay import duties, corporate income tax payments to cope with virus effects

  • Adrian Wail Akhlas

    The Jakarta Post

Jakarta   /   Thu, March 12, 2020   /   12:35 pm
Indonesia set to delay import duties, corporate income tax payments to cope with virus effects Tax compliance: A number of taxpayers file their returns with the Jakarta Tax Office in Tanah Abang, Central Jakarta. Indonesia's tax-to-GDP ratio stood at 11.5 percent in 2017, the lowest in Asia and the Pacific. (JP/Nurhayati)

Indonesia is set to delay import duties and corporate income tax payments for six months while also expediting the repayment of overpaid taxes in new fiscal measures to shield the economy as the coronavirus pandemic pressures businesses.

Coordinating Economic Minister Airlangga Hartarto said the fiscal stimulus aimed to stimulate manufacturing activity, adding that the government was finalizing the supporting regulations to enact such policy.

“We hope to implement the stimulus package in April after preparing the legal background,” Airlangga told reporters in Jakarta on Wednesday.

Manufacturing industries have complained of raw materials 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.

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

Industry Minister Agus Gumiwang Kartasasmita said the stimulus for import taxes aimed to fulfill industry needs of raw materials.

“This is related to the import duty for raw materials. In principle, we have already agreed on how much it will cost,” Agus said, declining to say how much the stimulus would cost. “We will decide the new economic package in the next few days.”

Finance Minister Sri Mulyani Indrawati said the move to provide these incentives took aim at relieving industries’ burden caused by the pandemic. “This aims for all industries to have [breathing] space in this tight situation,” she added.

The government is also set to temporarily exempt manufacturing workers from income tax payment to relieve workers’ burden.

The minister has warned 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 has said that it was likely to trim the economic growth forecast in 2020 at this month’s board of governors meeting on March 18 and March 19.

The tax break for manufacturing workers and tax payment lenience for businesses are in line with industry needs as conveyed by the Indonesian Chamber of Commerce and Industry (Kadin) and the Indonesian Employers Association (Apindo).

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

“Yes, we have talked about fiscal and monetary policies [with the government] We also discussed matters related to exports and imports,” Kadin chairman Rosan Roeslani said earlier in March, acknowledging that the virus had caused a decline in the sales and production of several industries, including automotive businesses and tourism.

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

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

Read also: Bank Indonesia spends Rp 110t to stabilize markets as virus stokes sell-off

It also said on Wednesday that 34 individuals had tested positive for COVID-19 in Indonesia.

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