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)