The government plans to cut the maximum taxation rates for personal and corporate income and reduce charges on dividend revenue, the chief tax official said, quoted by Dow Jones.
The government and a parliamentary commission last week approved a cut in the maximum tax rate on personal income to 30% from the current 35%, and set a single rate of 28% for most companies next year, falling to 25% in 2010, said Darmin Nasution, Director General of Taxation.
Indonesia will halve the rate on dividend revenue to 10% from 20 for personal tax payers and exempt dividends that companies earn from subsidiaries from taxes. The changes come as Indonesia is trying to get more of its 243 million citizens to register as tax payers to boost revenue collections.
"We hope these policies will attract more people to register," Nasution said, saying that there were six million registered tax payers in 2007.
Still, the changes may lead to a loss of Rp40.8 trillion ($4.46 billion) in potential tax revenue in 2009.
The new rates, effective next year, are pending approval by a plenary session of the nation's parliament.
Annual personal non-taxable income, which is deducted from earnings for calculating tax payments, will rise to Rp15.84 million in 2009 from Rp13.2 million rupiah.
Indonesia will also exempt residents that have tax registration numbers from paying the Rp1 million fiscal tax imposes whenever residents leave the country.
The government will also give incentives for companies whose shares trade on the Indonesia Stock Exchange. Companies that have 40% or more of their stake traded on the exchange will get a 5% point discount, paying a rate of 23% on their income next year and 20% in 2010.