Amending the tax laws<\/p>\n
The four bills on taxation which Minister of Finance Mar'ie
\nMuhammad unveiled to the House of Representatives on Saturday
\nconvey good news to the middle and high-income people as the
\nlowest and highest tax rates will be reduced and the number of
\ntax brackets will be increased from the current three to four.<\/p>\n
The tax brackets and rates imposed by the current Income Tax
\nLaw of 1983 have been considered unfair to the middle-income
\nearners whose number has increased rapidly over the past decade.
\nThe lowest tax rate under the current law, which amounts to 15
\npercent for an annual income of up to Rp 10 million (US$4,600),
\nwill be lowered to 10 percent for an annual income of up to Rp 25
\nmillion. This tax burden will be even lighter than it appears
\nfrom the above figures due to the fact that the maximum amount of
\nincome deductible from the taxable income will be increased for a
\nsingle (unmarried) taxpayer from Rp 960,000 to Rp 1.72 million
\nand for a married taxpayer with three children from Rp 3.84
\nmillion to Rp 6.9 million.<\/p>\n
This is how the tax reduction will reflect in the take-home
\npay of a single, fresh-out-of-the-university graduate working in
\nthe private sector, who normally gets a monthly salary of Rp
\n500,000. Under the present law, his monthly take-home pay amounts
\nonly to Rp 437,000, but under the new law his monthly net income
\nwill increase to Rp 464,400.<\/p>\n
But perhaps the high-income earners and corporate taxpayers
\nwill reap the most benefit because the highest tax rate will be
\nlowered from 35 percent for an annual income in excess of Rp 50
\nmillion to 30 percent for an annual income exceeding Rp 75
\nmillion.<\/p>\n
The bill on income tax, besides reducing the tax burden, also
\nallows companies to deduct expenditures on research and
\ntechnology and human resource development from their taxable
\nincome.<\/p>\n
The new legislation also vests a broader authority in the
\ngovernment to grant tax incentives to investors operating in
\nparticular locations and doing business in particular fields.
\nThis authority will put the government in a better position to
\nattract investments to the business areas or locations which are
\ngiven high priorities for development.<\/p>\n
But for tax evaders, the news is not good. The bill on general
\ntax provisions and procedures bears a heavier stick, or penalty,
\nfor tax evasion. The heaviest jail term for tax evaders will be
\ndoubled to six years from the current three, and the statute of
\nlimitations on the amount of time the tax director general has to
\ncorrect the income tax returns already filed by taxpayers will be
\nlengthened from five to 10 years.<\/p>\n
The new general tax provisions and procedures allow not only
\nfor the confiscation of the assets of a taxpayer who owes the
\ngovernment tax arrears but also for the detention of the errant
\ntaxpayer for one year at the most.<\/p>\n
It is thus clear that the four bills which will amend the four
\nlaws which were enacted in 1983 and 1985 under the country's
\nfirst massive tax reform program are designed to accommodate new
\ndevelopments in the economic sector, but also, and more
\nimportantly, to improve the climate for business operations.<\/p>\n
The bills maintain the principle of self-assessment in the
\nfiling of annual income tax returns, but provide a broader
\nauthority for tax officials to enforce a more vigorous tax
\ncollection drive.<\/p>\n
One might conclude that the lower tax rates and the broader
\ntax brackets would reduce, instead of raising, government tax
\nreceipts. But the bottom line of this measure actually will mean
\na boost in tax receipts. Because the lower tax burdens can be
\nexpected to help discourage tax evasion and stimulate new
\ninvestments, thereby broadening the tax base.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/amending-the-tax-laws-1447893297",
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"sponsor": "Okusi Associates",
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