JAKARTA (Reuters) – Indonesia’s finance minister on Monday tabled a government proposal to revise tax rules, including launching an undisclosed asset reporting program, introducing a carbon tax and increasing the VAT rate.
Indonesian Finance Minister Sri Mulyani Indrawati speaks during the IMF conference in Jakarta, Indonesia, February 27, 2018. REUTERS / Beawiharta / Files
Sri Mulyani Indrawati, speaking at a meeting with Parliament’s Finance Commission, said the measures are aimed at boosting government revenues, which have plummeted in Southeast Asia’s largest economy due to the coronavirus pandemic.
“While we are discussing this during the COVID pandemic, it does not divert our attention from the medium- and long-term need to build a fair, healthy, effective and accountable tax system,” said Sri Mulyani of the economic recovery.
The minister proposed increasing the VAT principle from the current 10% to 12%, applying a range of 5 to 25% for some goods and services and abolishing most of the exemptions. To limit the impact on the poor, she proposed more subsidies.
An income tax rate of 35% has been introduced for those with annual income of 5 billion or more rupiah (US $ 345,662). Indonesia now has 5 to 30% income tax.
She also proposed a new carbon tax of 75 rupiah ($ 0.0052) per kg of CO2 equivalent and an excise tax on all plastic products.
The minister unveiled a program that will allow people to report undisclosed assets following Indonesia’s previous tax amnesty in 2016-2017.
According to a copy of the bill submitted by a legislature, the government wants to give taxpayers another option to declare hidden assets by charging a rate between 12.5% and 30% of the asset.
The minister also proposed an “alternative minimum tax” for loss-making businesses that continue to operate, a way to settle tax crimes with fines, and a revision to allow other parties such as electronic transaction providers to collect taxes on behalf of the government.
The bill is to be discussed with Parliament’s Finance Commission, which usually takes several months before it is submitted to a broader parliamentary vote. The government controls more than 70% of the seats in parliament.
($ 1 = 14,450,0000 rupees)
Reporting by Tabita Diela and Gayatri Suroyo; Editing by Ed Davies