Sun, 06 Jul 2008
From: The Jakarta Post
By Aditya Suharmoko, The Jakarta Post, Jakarta
The government and the House of Representatives have agreed to reduce tax on companies' dividend payments despite disagreements between House factions on the size of the cut.

Melchias Markus Mekeng, head of the House's committee overseeing the income tax bill currently under deliberation, said Wednesday the two largest factions at the House -- the Indonesian Democratic Party of Struggle (PDI-P) and Golkar Party factions -- wanted the tax cut to 5 percent.

However, the remaining eight factions and the government agreed to cut the dividend tax rate to 10 percent from the current 20 percent.

A dividend tax-rate cut, Melchias said, was expected to help speed up the growth of the private sector and eventually boost investment in the stock market.

Privately held companies must not pay out dividends more than once in three years, as stated under an article in the bill, Melchias said.

Publicly listed companies, which are not subject to the bill, must pay out dividends at least once a year, he said.

The government, represented by the directorate general of taxation at the Finance Ministry, and the House are set to finalize the bill Thursday.

Director general of taxation Darmin Nasution declined to comment on the income tax bill. "Let's wait until it is finished," he said.

During Wednesday's deliberation on the bill, the government and the House agreed to raise the taxable annual income threshold for an unmarried individual to Rp 15.86 million (US$1,721.1), up from Rp 13.2 million currently.

The increase is hoped to reduce the tax burden on low-income people, who are suffering the effects of surging consumer prices, which have been boosted by rising global crude oil and food commodity prices.

Currently, the income annual minimum tax threshold for an individual is Rp 13.2 million per year. For a married person whose spouse is unemployed, the value is set at Rp 14.4 million per year.

If both are employed, the threshold is Rp 27.6 million, and the amount raises by Rp 1.2 million per year per child for a married couple.

Melchias said the PDI-P faction insisted that for a married person whose spouse is unemployed, the threshold should be further raised by 20 percent from Rp 15.86 million, or by Rp 3.17 million per child per year.

"The government, meanwhile, insists the threshold should be raised by Rp 1.2 million per child per year," Melchias said.



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