Jakarta. The government has proposed a plan to add a new income tax bracket imposing a 35 percent tax rate on any annual income above $348,000 as part of a sweeping move to revamp Indonesia's tax code and boost state revenue.
Finance Minister Sri Mulyani Indrawati told the House of Representatives members on Monday that the government sought to add the new income tax rate for personal income of above Rp 5 billion ($348,000) per year.
"For individuals with high net wealth, the increase from 30 percent to 35 percent on income Rp 5 billion per year is not that significant," Sri Mulyani said.
"Only a few people in Indonesia are included in that group," Sri Mulyani told the House's Commission XI, which oversees finance and banking, in a meeting on Monday.
Last year, there were 21,430 high net worth individuals in Indonesia with net assets worth more than $1 million, property consultancy firm Knight Frank estimated in a recent report. That is, about eight in 100,000 people in Indonesia are millionaires.
The consultancy firm estimated that Indonesia's high net worth individuals would double to more than 45,000 people in 2025.
Still, Indonesia's millionaire ratio was low compared to the Asia region, which has 228 millionaires in 100,000 people.
Indonesia imposes progressive tax rates under the country's current tax code. Taxpayers only need to pay 5 percent tax on their income up to Rp 50 million. Above that bracket, they need to pay 15 percent tax on income up to Rp 250 million. Income above Rp 250 million to Rp 500 million commands a 25 percent tax rate.
Indonesia's top earners currently pay a 30 percent tax rate on any taxable annual income above Rp 500 million.