Workers at a construction project in Jakarta in 2017. (Antara Photo/Akbar Nugroho Gumay)

Indonesia Extends Tax Breaks to Include All Sectors

BY :LENNY TRISTIA TAMBUN

APRIL 23, 2020

Jakarta. The government would soon extend a series of tax breaks issued to counter the economic impact of the coronavirus pandemic to all sectors, eyeing to inject $2.3 billion into Southeast Asia's largest economy for the next six months, Finance Minister Sri Mulyani Indrawati said on Wednesday.

The news managed to boost the Indonesia Stock Exchange on Thursday, with the benchmark index rising 0.9 percent to 4,610 at the lunch break. 

Last month, the government issued tax breaks for 19 subsectors in the manufacturing industry to ensure companies would have enough cash to see out the coronavirus crisis. 

Since then, many other businesses have asked for similar incentives to help them cope with slowing demand during the coronavirus pandemic. 

Sri Mulyani said the government will revise a ministerial regulation to allow the tax breaks to be expanded to other sectors. 

"We hope to finalize the process this week," she said. 

Small and medium-sized enterprises have also been exempted from paying income taxes for the next six months.

Currently, small businesses pay 0.5 percent of their sales as income tax to the government. 

"We estimate a total of Rp 35.3 trillion [$2.3 billion] [for the expanded tax breaks] on top of the tax breaks for the SMEs," Sri Mulyani said. 

The tax breaks include leeways for individual income tax (PPh 21) for workers in the subsectors.

Indonesian companies usually deduct the tax from employees' monthly salary and pay the tax to the government. Not having to do so would help company cash flow. 

The government has also deferred payments of corporate income taxes (PPh 25) and deductible income taxes for importation (PPh 22). 

 

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