Wed, 16 Jul 2008
Aditya Suharmoko, The Jakarta Post, Jakarta

Indonesia may lose out on Rp 40 trillion (US$4.35 billion) in potential tax revenue next year if a planned income tax reduction scheme is put into effect, the directorate general of taxation says.

The income tax bill is currently under deliberation at the House of Representatives.

"The estimated potential loss is about Rp 40 trillion. However, I do not think tax revenue will decrease because we project a 21 percent rise (of tax revenues) in the planned 2009 state budget," Darmin Nasution said Tuesday.

Under the 2008 state budget, the government estimates tax revenue to be Rp 580.20 trillion. The government predicts next year tax revenue will reach Rp 702.04 trillion.

During this year's first semester, the tax office collected Rp 265.18 trillion in tax revenue, a 50.78 percent increase from Rp 175.88 trillion in the same period last year. Of the total revenue in this year's first half, income tax contributed Rp 129.66 trillion, up 34 percent from in the same period last year.

During their deliberations, the government and the House have so far agreed to cut several tax rates to bolster competitiveness in the country's private sector.

Last week, they agreed to cut the profit tax rate for micro, small and medium enterprises (MSMEs) by an average of 50 percent.

The institutions tax rate will be reduced to 28 percent from 35 percent, effective next year.

Companies listing at least 40 percent of their shares on the Indonesia Stock Exchange will see taxes cut 5 percent. The move is designed to increase investment in the stock market.

Tax on company dividend payments will be reduced to a maximum 10 percent from the current 20 percent.

The increasing taxable income threshold for individuals will also reduce the amount of tax income generated by the tax office, Darmin said.

For singles, the taxable income threshold has been raised to Rp 15.86 million per year from Rp 13.2 million per year. For those who are married, the new figure will increase by Rp 1.32 million per child, up from the current Rp 1.2 million per child.

The deliberation on the income tax bill is nearing an end and may be completed by the end of this month.



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