Sat, 08 Oct 1994

House seeks even lower tax rates

JAKARTA (JP): The House of Representatives (DPR) yesterday reached a provisional agreement to make changes in the government-sponsored tax bills, including slashing the range of proposed income tax rates and raising the range of sales tax tariffs.

Novyan Kamal, chairman of the special committee assigned by the DPR to deliberate on the tax bills, said the changes will be brought to a plenary meeting in the next two weeks for final approval.

He said that the income tax rates will change to 10 percent for the income bracket of up to Rp 25 million (US$11,500), 15 percent for income of Rp 25 million to Rp 50 million and 30 percent for income of above Rp 50 million.

Novyan described the changes in the tariff range as a new breakthrough for the House, which is often branded as merely a rubberstamp body.

"The changes are important to improve the fairness and to make the country's business climate more attractive," he told reporters following the completion of 10 days of marathon talks among the task forces set up by the committee.

The special committee, established early last month to deliberate on the government's four tax bills, has set up four task forces to speed up the deliberation process of the bills so that the new laws can be implemented in January next year.

The government's proposed income tax rates are set at 10 percent for the income level of up to Rp 25 million, 15 percent for the income of Rp 25 million to Rp 50 million, 20 percent for the income of Rp 50 million to Rp 75 million and 30 percent for income level of above Rp 75 million.


Novyan said that the four rates proposed by the government were slashed to three to simplify tax collection and monitoring.

The income tax rates, under the present law, are set at 15 percent for the income level of up to Rp 10 million, 25 percent for between Rp 10 million and Rp 50 million, and 35 percent for the bracket of above Rp 50 million.

Novyan said the new tax income rates, which will be further deliberated by the special committee before being taken to the House's plenary session for final approval, do not only reflect more fairness but also more competitiveness in attracting foreign investment.

The House also revised the government's proposal to maintain the rates of the sales tax for luxurious goods at between 10 percent and 35 percent to a higher range of between 10 percent and 50 percent.

Ben Messakh, which headed the task force for the sales tax bill, said the higher rate will curb people's spending for luxury goods.

He added that it will also lower the consumptive spending of the middle income taxpayers, who will benefit from the significant reduction in income tax rates. (hen)