Taxation Harmonization Law Hoped to Increase Revenue from 'Taxing The Rich'

TEMPO.CO, Jakarta - Indonesian investment bank and securities brokerage house Bahana Sekuritas commended the passing of the Taxation Harmonization Law by the House of Representatives (DPR) on October 7. It oversees, among others, income taxes (PPh) and the addition of a 35 percent personal income tax rate subjecting those with an annual income over Rp5 billion. 

According to the firm’s latest research, the additional Article in the law that subjects Indonesia’s wealthy demographic to 35 percent income tax can generate up to Rp8 trillion in tax revenue. 

The study by Bahana Sekuritas, citing a Bisnis.com report on October 9, stated that the Article can “Be something substantial as our calculation shows that there can be additional tax revenues ranging from Rp6-Rp8 trillion next year and Rp150 trillion annually from individual tax receipts.”

They argued that the latter amount was calculated from the population of Indonesia’s wealthy that have a deposit value of more than Rp5 billion, which is half of the total third party funds in banking. 

Moreover, the government had decided not to impose a corporate tax cut for next year with a 22 percent tariff, which differs from the content in the Omnibus Law of 20 percent. Bahana argued this aligns with the global corporate income tax rates that are currently increasing and in line with policy makers' efforts to raise funds to restore fiscal health post-pandemic

According to the Ministry of Finance on Friday, Indonesia’s tax ratio is currently at 8.4 percent and the Taxation Harmonization Law is expected to increase the tax ratio to 9.4 percent in 2024 and even 10 percent by 2025. 

Read: Indonesia to Impose Carbon Tax in April 2022 Using Two Schemes

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