Tax break benefits labor-intensive firms

Rendi Witular, The Jakarta Post, Jakarta

Businesspeople have hailed a new government policy that exempts tax payments for workers who are paid the minimum wage, saying it will not only help ease the financial burden of labor- intensive industries but also reduce the tax administration workload.

Indonesian Association of Food and Beverages (GAPMI) chairman Thomas Darmawan told The Jakarta Post on Sunday that since many companies paid the income tax of their workers, the tax break amid current rising utility prices would be much welcomed, particularly by those with a large workforce.

He said the policy would not only provide financial benefit, but also help companies avoid being squeezed by corrupt tax officials for administrative errors.

Thomas said that the workload of administering the tax obligation of a large number of workers was so huge and complicated that companies could sometimes make mistakes, giving an opportunity to corrupt tax officials to either extort money from the companies or collude with them.

He said that many businesspeople had long called for such a policy.

The government last week announced a fiscal stimulus package that includes the income tax break for a particular class of workers to help ease the burden of both the companies and the workers from the difficulties created by the hike in fuel prices, electricity rates and telephone charges.

Under the policy, the government will cover the 5 percent tax obligation of workers with a salary of less than or equal to the provincial minimum wage.

The details of the policy have yet to be finalized, but reports say that workers with an annual income of more than the minimum wage would only pay tax only on the difference.

Indonesian Footwear Association (APRISINDO) chairman Anton Supit concurred with Thomas.

"I don't think the nominal value (saved) is that significant for small and medium-scale companies, but it will help reduce the administrative work and firms can avoid falling victim to crooked tax officials," he said.

Elsewhere, Thomas said the government and GAPMI were scheduled to hold a meeting on Monday to discuss a fiscal stimulus package for the food industry.

Previous tax breaks benefited electronics manufacturers.

Thomas said the food and beverages association had proposed luxury tax exemption for soft drinks, yogurt and other fermented milk products, and canned and extracted fruit products.

He said that the above products should not be categorized as luxury goods.