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Forgoing corporate tax cut may not hurt business much: Experts
A 20 percent corporate income tax rate remains a distant dream for Indonesian businesses as the newly passed Harmonized Tax Law (HPP) stipulates no cut in the rate, contrary to an earlier government plan.
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Finance Minister Sri Mulyani Indrawati speaks at the House of Representatives on Sept. 13 in a discussion on a bill regulating fiscal relations between the central government and the regions, as well as a bill on taxation. (Finance Ministry/Public relation team)
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20 percent corporate income tax rate remains a distant dream for businesses as the newly passed Harmonized Tax Law (HPP) stipulates no cut in the rate, contrary to an earlier government plan.
In the wake of the plan’s cancellation, some business groups have expressed concern that the move might harm Indonesia's business climate, but analysts say the impact will be minimal.
The new law keeps the corporate income tax rate at 22 percent, where it has been since 2020.
The move caught business groups by surprise, as the government had previously appeared keen to slash the rate, in line with Law No. 2/2020 on the COVID-19 response, which stipulates a cut from 25 percent to 22 percent in 2020 and to 20 percent in 2022.
The new law, however, revokes that stipulation.
A first draft of the bill, a copy of which was obtained by The Jakarta Post, explicitly stated that the rate would go down to 20 percent in 2022. On top of that, the 2020 Job Creation Law stresses the importance of lowering the corporate income tax so as to improve the business climate and thereby lure investment.
According to the Inventory List of the HPP draft, seven of nine parties had no objections to the 20 percent rate, leaving only the National Awakening Party (PKB) and the Prosperous Justice Party (PKS) in opposition to the cut.
