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Gov't to Waive Income Taxes for Six Months to Prop Up Economy Amid Covid-19 Outbreak

Faisal Maliki Baskoro
March 11, 2020 | 9:51 pm
Finance Minister Sri Mulyani Indrawati, left, answers questions from reporters after a meeting at the Coordinating Ministry for the Economy office in Jakarta on Wednesday. (Antara Photo/Muhammad Adimaja)
Finance Minister Sri Mulyani Indrawati, left, answers questions from reporters after a meeting at the Coordinating Ministry for the Economy office in Jakarta on Wednesday. (Antara Photo/Muhammad Adimaja)


Indonesia will grant a six-month tax break for employees, manufacturers, and importers, starting as soon as next month, as part of its second fiscal stimulus to help prop up the economy amid the novel coronavirus outbreak. 

Finance Minister Sri Mulyani Indrawati said on Wednesday the government would suspend collecting employees' income taxes, also known as PPh 21. The ministry's tax office would waive the income tax paid monthly (PPh 25) by entrepreneurs in the manufacturing sectors, she said. 

The manufacturing industry would also skip paying deductible income taxes that must be paid when they import goods or raw materials (PPh 22) for the next six months, Sri Mulyani said. On top of that, the government would expedite any tax restitution process, to ensure that local businesses have enough cash for their operation. 


"All of these measures are aimed at giving the industry the breathing space amid a very difficult situation right now," Sri Mulyani said in Jakarta. 

The minister has earlier projected that the largest economy in Southeast Asia could see its growth slowing down to 4.70 percent this quarter, from the 4.97 percent pace in the last quarter as the Covid-19 outbreak disrupted China's economy, Indonesia's largest trading partner. 

The country has reported 34 confirmed cases of the pneumonia-like disease, with one fatality, since March 1, stoking concerns about the outbreak to wreak havoc on Indonesia's domestic consumption. 

The government pledged more than $700 million injections to its economy, especially for regions with high exposure to tourism, as part of its first stimulus package. 

Sri Mulyani said the government would relax various restrictions (Lartas), especially for 500 reputable importers, in order to accelerate imports of raw and semi-finished materials for local manufacturers.

Sri Mulyani said the details on the restriction relaxation would still be finalized with President Joko "Jokowi" Widodo. "If possible, it would be in a meeting later this week. Then we can announce it immediately," she said. 

Coordinating Minister for the Economy Airlangga Hartarto said that in terms of logistics, the government will accelerate the integration of the Indonesia National Single Window (INSW) -- an online platform for paying trade-related duties and taxes -- with Inaportnet, another platform for processing trade permits and licensing.  

Airlangga said the platforms would integrate under a single platform, the National Logistics Ecosystem.

"The National Logistics Ecosystem will be prepared to facilitate imports," Airlangga said, adding that the government is still working on the details. 

Airlangga said he expected all the policy measures would be ready for implementation in April. He also did not rule out a possibility that this stimulus would be extended beyond the six-month period. 

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