A security guard walks past monitors at Indonesia Stock Exchange in Jakarta on Friday. (Antara Photo/Dhemas Reviyanto)

Indonesian Listed Companies to Pay Lowest Tax Rate in Southeast Asia

BY :THEREIS KALLA, NABIL ALFARUQ

JUNE 28, 2020

Jakarta. Some of Indonesia's listed companies will enjoy a lower income tax rate of 19 percent this year and next year, with a further 3 percent cut starting in 2022 that would make the rate lower than Singapore's corporate income tax rate, the Finance Ministry said last week. 

The government has already lowered the income tax for companies to 22 percent last month as part of its stimulus package to ease the impact of the Covid-19 pandemic to Indonesia's economy. 
 
Further cuts for listed companies, would improve the competitiveness of Indonesian companies, that until recently still pay one of the highest corporate income tax rate in Asia. 

"I think the policy is on point to strengthen the competitiveness of our businesses," Samsul Hidayat, the executive director of the Indonesian Listed Companies Association (AEI).

The cut introduced by the government would allow some listed companies to pay tax at a 16 percent rate, lower than 17 percent rate in Singapore which currently offers the lowest corporate income tax rate in Southeast Asia.

 

The government said only listed companies with more than 40 percent free float — the proportion of the companies shares that the public can trade in the stock exchange — can enjoy the tax cut.

Also, those companies have to ensure that at least 300 separate parties own the companies shares — with ownership not exceeding 5 percent each and not affiliated to each other nor the companies in question.

Vidjongtius, the president director of Kalbe Farma, said the new tax cut would mean some listed companies to see their income tax bill fell from 20 percent to 19 percent. 

"Earlier, these companies enjoy a 5 percent cut [from 25 percent tax rate]. Today, it was only 3 percent [from 22 percent]. So, there is still a positive impact on us, but relatively small," Vidjongtius said. 

Also, the cut would not benefit property developers. 

"Property developers pay a final tax, so we will not benefit from the new incentive from the government," Tulus Santoso, the president director of Ciputra Development, said.

Today, Indonesia imposes a 2.5 percent final tax on any land and property sales. So, although the public holds more than 47 percent of its shares, Ciputra Development would still pay the same rate as they used to pay. 

Edwin Sebayang, the head of research at MNC Sekuritas, said the government should consider granting more extensive cuts.

"According to several companies, the incentives are good that it allows them to allocate more funds to capital expenditure. But, I think it should be 5 percent cut in 2020 and 2021 and 8 percent cut in 2022," Edwin said. 

"If the government wanted to be serious, it should have been like what President Donald Trump did in the US, by giving a 15 percent discount. If that were the case, the capital inflow would jump, and employment number would increase," he said.


 

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