The President should issue a new decree slashing corporate tax if the House of Representatives refuses to pass the income tax bill, the chairman of the Indonesian Chamber of Commerce and Industry (Kadin) said Wednesday.
"The corporate tax should be cut to allow us to be more competitive," MS Hidayat told reporters on the sidelines of the Indonesian Employers' Association (Apindo) national congress at the State Palace in Jakarta.
Hidayat said President Susilo Bambang Yudhoyono had room to cut the corporate tax rate because the law stipulated the current rate of 30 percent was the maximum allowed.
"It means he can reduce the tax to 25 percent or 20 percent through a presidential decree, as it doesn't violate the law. Later, the decree could be strengthened by a law," he said.
He said a discussion with the director general of taxation had indicated the move was viable.
He also dismissed concerns a lower tax rate would cut state revenue even further, citing the successful experiences of other countries with lower tax rates.
"Singapore has a 19 percent tax rate while Russia's is only 15 percent. It is true that a low rate makes for higher compliance," he said.
The President, Hidayat said, had considered cutting the tax rate incrementally.
"The President has asked whether we could do it in two stages, first from 30 percent to 28 percent, then later to 25.
"The government will also be tough on people evading taxation by jailing both businesspeople and officials," he said.
The income tax bill is currently being discussed at the working committee level at the House and is expected to be fully implemented next year.
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