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Jobs law offers tax incentives to attract investment
The Finance Ministry’s Fiscal Policy Agency head, Febrio Kacaribu, has said that new tax incentives in the omnibus law can make Indonesia’s tax regime more competitive globally.
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Tax officers wear masks and face shields as they work at the Surakarta Tax Office in Central Java on June 15. (Antara/Mohammad Ayudha)
T
he government is hoping that the new tax incentives introduced in the recently passed Job Creation Law help to grow the economy by attracting more investment and creating jobs.
The Finance Ministry’s Fiscal Policy Agency head, Febrio Kacaribu, said Monday that the new incentives, in addition to the ones offered in Law No. 2/2020, could make Indonesia’s tax regime more competitive globally.
The jobs law eliminates income tax on dividends earned in Indonesia and on certain income, including dividends earned abroad, as long as they are invested in the country. It also introduces 10 percent value-added tax (VAT) on coal and relaxes administrative sanctions and taxes for foreigners with certain expertise.
The provisions in the omnibus law aim to complement several regulations in Law No. 2/2020, which was issued earlier this year to gradually lower the corporate income tax and impose VAT on services and goods sold in Indonesia by global technology companies, among other things.
Thirty-six technology companies appointed by the government to collect these taxes had paid Rp 97 billion (US$6.58 million) to the state coffer as of September, according to the tax office.
“However, we need to acknowledge that the tax incentives alone are not enough. It must be followed by reforms in other fields, especially in the context of [business] licenses,” Febrio told reporters in a virtual briefing on Monday.
“The jobs law mostly addresses the simplification of regulations. We hope this year’s reform and [improved] ease of doing business will gradually raise our tax ratio,” he added.
