Indonesia May Tax The Rich, Top Polluters for More State Revenue

• Indonesia seeks to cast a wider net to tax more high-income individuals and top polluters in a bid to replenish its state coffers.
• The finance ministry presented the proposals, which could be part of key reforms in 2021, to a parliamentary commission this week. The government needs to collect more revenue to sustain spending while keeping its vow to bring budget deficit back within the 3% of gross domestic product legal limit, from 6% in 2020.
• “The goal of this tax reform is not just revenue collection but the sustainability of the state budget,” said Finance Minister Sri Mulyani Indrawati. “The whole world is also accelerating its revenue collection in the midst of soaring budget deficits and debt ratios. This is a response that must be done with caution.”
• The government has proposed a plan to add a new income tax bracket imposing a 35% tax rate on any annual income above IDR5bn (USD348,000). Taxpayers are currently grouped into four brackets, with rates ranging from 5%-30%.
• “For individuals with high net wealth, the increase from 30% to 35% on income IDR5bn per year is not that significant,” Sri Mulyani said.
• The country is poised to see the world’s fastest growth in ultra-high net worth individuals in the next five years, with the figure doubling to more than 45,000 by 2025, according to a report by consultancy firm Knight Frank LLP.
• Indonesia could introduce multiple tiers for value-added taxes, with lower rates for basic necessities and higher ones for luxury items. It currently imposes a single tariff of 10% on all covered goods and services. More items could also be taxed, with rice, corn, drinking water, electricity and financial services currently exempted.
• Furthermore, taxing carbon emissions will help Indonesia curb greenhouse gases while raising funds for green state investments and social welfare programs, Indrawati said.
• The government could use existing taxes such as excise, motor vehicle and fuel taxes to enforce it, or it could create an entirely new levy through a carbon tax.
• Indonesia is also finalizing the formula to tax digital companies and impose levies on electronic transactions. The government has issued a law stating that taxes could be imposed on companies with significant economic presence in the country, but it hasn’t set out regulations for the tariff or how it would impose and calculate it.
• Meanwhile, Indonesia could take another stab at a tax amnesty program, following a 2016 program that uncovered IDR4,813tr (USD336bn) in undeclared assets.

External Link : https://www.bloomberg.com/news/articles/2021-05-25/indonesia-may-tax-the-rich-top-polluters-for-more-state-revenue

External Link : https://jakartaglobe.id/business/govt-to-increase-top-earners-income-tax-to-35