Indonesia Considers Cutting Corporate Tax Rate

Jakarta, 07 Dzulqa’dah 1437/10 August 2016  (MINA)  – Indonesian President Joko Widodo is considering cutting Indonesia’s corporate tax rate in an effort to make the Southeast Asian nation more competitive and discourage domestic companies from parking their money overseas, thewsj.com reported.

“My thinking is simple. If the corporate income tax in Singapore is 17%, why do we have to impose a 25% tax here? How are we going to be able to compete?” Mr. Widodo was quoted as saying on the cabinet secretariat’s website on Wednesday.

Mr. Widodo told a gathering of wealthy Indonesians in Central Java’s capital of Semarang Tuesday evening that the government is trying to decide whether to cut the corporate tax rate at once or gradually reduce it from 25% to 20% and then to 17%.

The government is also studying the possibility of making one of Indonesia’s islands a tax haven, where a minimal tax would be imposed on individuals and companies, the website quoted the president as saying.

Mr. Widodo said he hoped parliament would back the tax-cut plan and that it would be completed by next year, the website reported.

Lowering the corporate tax rate would give companies more cash for expansion, which in turn would generate more tax revenue for the government, said Handaka Santosa, a commissioner at publicly traded retailer PT Mitra Adiperkasa.

“Cutting corporate income tax is a must if we want to make Indonesia more competitive,” he said.

The government since late last year has introduced a raft of tax incentives to attract investment in the country as economic expansion in the $900 billion economy slowed to its lowest level in six years last year. But it hasn’t yet reduced the corporate tax rate.

Economists said in the near term cutting the corporate tax would strain the government’s budget, which has already come under pressure from weak commodities prices.

The government collected 522 trillion rupiah ($40 billion) in tax revenue during the first six months of the year, lower than 535 trillion rupiah during the same period last year. (T/R07/R01)

Mi’raj Islamic News Agency (MINA)