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House hastily passes overhauled tax law
The new law, which was shielded from public scrutiny, raises income taxes on the rich, increases value-added taxes (VAT) and introduces carbon taxes, among other changes meant to increase state revenue.
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Finance Minister Sri Mulyani Indrawati holds a copy of the March 2019 edition of the APBN Kita booklet during a press conference in Jakarta. (Finance Ministry/Faiz)
T
he House of Representatives passed a bill on Thursday to overhaul the country’s tax system after what has been called one of the hastiest deliberations in Indonesia’s modern legislative history.
The Harmonized Tax Law (HPP), previously called the Amended General Taxation Law, raises income taxes on the rich, increases value-added taxes (VAT) and scraps a proposal to cut corporate income taxes. It also introduces carbon taxes, a second tax amnesty period and a plan to swap taxpayer identification numbers (NPWP) with identity card numbers (NIK) for easier tracking.
The government expects the changes to boost state revenue before the country reinstates the budget deficit ceiling of 3 percent of gross domestic product (GDP) in 2023. Lawmakers lifted the cap last year to accommodate more than a billion dollars of spending for COVID-19 relief.
The passage of the HPP marks the government’s second use of the “omnibus law” method, whereby a single piece of legislation revises multiple others at once. The new tax law amends the General Taxation Law, the Income Tax Law, the VAT Law and the Stamp Duty Law.
"I ask all members at this second-level meeting again: Can we agree to pass the bill into law?” asked House Deputy Speaker Abdul Muhaimin Iskandar at a live-broadcast plenary session in Jakarta on Thursday, before rapping his gavel on the podium.
Eight of the nine parties in the House agreed to pass the bill, with the Prosperous Justice Party (PKS) withholding its support.
Law and Human Rights Minister Yasonna Laoly said the new law was an important part of the country’s tax reform efforts, which supporters hope will boost GDP growth, hasten the economic recovery and improve state revenue.
