TheJakartaPost
Please Update your browser
Your browser is out of date, and may not be compatible with our website. A list of the most popular web browsers can be found below.
Just click on the icons to get to the download page.
Indonesia aims to tax rich more to finance large pandemic deficit
The proposal goes along with other increases in value-added taxes, a new carbon tax and another proposal for tax amnesty.
Change Size
The government is proposing a higher rate of personal income tax targeting people with earnings of at least Rp 5 billion (US$351,500) a year. (Shutterstock/File)
W
hile struggling to finance a deficit budget to pull the country through a health crisis and economic recession due to the pandemic, Indonesia is seeking to increase taxes on high-income individuals and families.
Through an amendment to Law No. 6/1983 on general provisions and tax procedures (KUP), the government is proposing a higher rate of personal income tax targeting people with earnings of at least Rp 5 billion (US$351,500) a year. These people are also known as high-net-worth individuals (HNWIs).
The proposal goes along with other increases in value-added tax, a new carbon tax and another proposal for tax amnesty.
Finance Minister Sri Mulyani said the proposed tax increase for HNWIs was from 30 to 35 percent.
“It is not that big,” she told lawmakers during a hearing with lawmakers at the House of Representatives.
Indonesia currently groups its taxpayers into four different income brackets ranging from less than Rp 50 million to over Rp 500 million per year. Each bracket is subject to one of four tax rates, namely 5 percent, 15 percent, 25 percent and 30 percent.
The new rate for HNWIs will add a new income bracket, meaning that the 30 percent tax rate will apply to those earning Rp 500 million to Rp 5 billion. Individuals who earn more than Rp 5 billion per year will be charged the proposed 35 percent rate.
