Losing share transactions will also be taxed

Losing share transactions will also be taxed

JAKARTA (JP): Tax Director General Fuad Bawazier said
yesterday that the proposed tax on the capital market will not
discourage stock trading even though it will also be imposed on
losing transactions.

Fuad said that the new capital market tax, which will use a
single rate of 0.1 percent (1/1,000) of the transaction value,
will replace the 15 percent tariff which is presently imposed on
the capital gains in stock trading.

"All share transactions during the whole tax year will be
taxed," he told The Jakarta Post during a break in the
deliberation of tax bills yesterday.

The new capital market tax is part of the income tax bill, one
of the government-sponsored four tax bills, which are now being
deliberated by the House of Representatives (DPR). The other
three bills cover the value added tax (VAT), land and building
(property tax), as well as tax provisions and procedures.

The deliberation on the tax bill, which began early last week,
is scheduled to be completed early next month, while the
implementation of the new laws are scheduled for January next
year.

The Moslem-dominated United Development Party (PPP) last week
questioned the government's plan to base stock trading taxation
on transaction values, but it later supported the plan after
Finance Minister Mar'ie Muhammad noted that the system has been
adopted by almost all developed stock exchanges.

If the new tax system is approved, the government will likely
collect over Rp 20 billion (US$9.5 million) from the Jakarta
Stock Exchange (JSX). During the first semester of this year
alone, the transaction value at the JSX reached Rp 12.35
trillion.

Difference

The PPP faction defended its stance on the need to introduce
different income tax rates for individuals and corporations to
improve the fairness of the country's tax system, while the
Indonesian Democratic Party (PDI) insisted on the need to further
widen the income brackets to five from the four proposed by the
government.

The two factions also called for raising the untaxable income
for an individual taxpayer to over Rp 2.4 million per annum.

The government proposes reducing the income tax rates to 10
percent for the lowest income bracket of up to Rp 25 million
((US$11,500), 15 percent for the income bracket of between Rp 25
million to Rp 50 billion, 20 percent for the income bracket of Rp
50 million to Rp 75 million and 30 percent for the income bracket
of above Rp 75 million.

Under the present tax law, the rate of income tax for the
lowest income bracket of up to 10 million is 15 percent, 25
percent for the income bracket of Rp 10 million to Rp 50 billion
and 35 percent for that above Rp 50 million.

The income tax bill also seeks to increase the untaxable
income for an individual taxpayer to Rp 1.72 million ($822) from
Rp 960,000 at present. The additional tax exemption for a married
taxpayer rose to Rp 864,000 from Rp 480,000, while the additional
deduction for a wife will increase to Rp 1.72 million from Rp
960,000 at present and the deduction for a child will be raised
to Rp 960,000 from Rp 480,000. (hen)