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Govt, House to start talks on new tax law
The government has formally requested the House of Representatives to deliberate a draft for a new tax law that would introduce changes to value-added tax as well as personal and corporate income taxes and introduce a carbon tax and a new tax amnesty.
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T
he government has requested the House of Representatives to begin talks over a revised General Taxation Law, bringing the government closer to introducing new tax policies, including a change on value-added taxes.
Coordinating Economic Minister Airlangga Hartarto said Wednesday that the President had sent the request letter to the House of Representatives to begin discussing a draft of the fifth revision of the 1983 General Taxation Law.
Airlangga said the revision would cover changes to value-added tax, personal income tax, luxury sales tax and excise, lowering corporate income tax and introducing a carbon tax and a second tax amnesty.
“There will be a couple of things we will discuss, the result awaits deliberation with the House,” Airlangga said in an online press briefing on Thursday. “We hope the deliberation will take place as soon as possible.”
The House has made the tax law revision a legislative priority by including it in this year’s National Legislation Program (Prolegnas).
The draft comes at a time when the government is seeking to address its low tax revenue – relative to the country’s gross domestic product (GDP) – by broadening the tax base, such as by imposing a value-added tax on digital services provided by companies like Netflix.
Read also: Indonesia collects $20.9m in digital tax as of October
The government has introduced several tax incentives to stimulate the economy during the COVID-19 pandemic, including by lowering personal and corporate income taxes. Some 286,000 taxpayers have benefited from the incentives worth Rp 14.95 trillion (US$1.03 billion) in the January-March period, according to the Finance Ministry.
Airlangga added that the government was also planning to introduce goods and services taxes (GST) to allow for more revenue to be collected from manufacturing, trade and the service sector.
“The rate will be implemented at the right time, and we will make the scenario broader,” said Airlangga. “The details will follow the deliberation in the House.”
At Rp 228.1 trillion, tax revenue in the January-March period was down 5.6 percent from a year earlier. Personal and corporate income taxes contracted annually by 5.58 percent and 40.48 percent, respectively.
