Govt plans cutting VAT, corporate taxes

Govt plans cutting VAT, corporate taxes

The Jakarta Post, Jakarta

The government plans to make sweeping changes to the tax system
by cutting down the value added tax (VAT) and corporate tax to
help improve the country's competitiveness, Minister of Finance
Boediono said on Friday.

"In the medium term, the corporate tax and VAT will be cut to
improve our competitiveness with other countries. The rate now
is quite high," Boediono was quoted by Antara as saying, prior to
a meeting with the House of Representatives Commission IX on
state budget and finance.

He said that the size of the tax cut and the timing were still
being discussed and it would be adjusted to the latest
development, particularly with the full implementation of the
ASEAN Free Trade Area (AFTA) next year.

He said that AFTA would seriously affect trade competition
among countries inside the Association of South East Asian
Nations (ASEAN).

He explained that the lower tax rate would help improve the
competitiveness of the country's products.

Many businessmen had previously urged the government to lower
the existing corporate tax and VAT amid the current economic
hardships and fiercer competition in winning markets overseas.

But the cash-strapped government for the time being has no
other choice than to maintain the current tax level in a bid to
collect sufficient tax revenues to help finance the state budget,
which is heavily burdened with the huge cost of government bank
bailout program.

There has also been calls for the government to introduce tax
holiday facility to attract new foreign investments into the
country.

Other regional governments have planned or launched a lower
tax policy in a bid to maintain competitiveness in trade areas.