The government is targeting a draft omnibus law bill on taxation will be discussed with the House of Representatives in December this year - Photo: InsiderStories.

JAKARTA (TheInsiderStories) – The government is targeting to release an omnibus law on taxation in 2010 as part of the country’ effort to drive the economy, said the minister on Friday (11/22). The draft of the new bill will send to the House of Representatives in December.

Finance minister Sri Mulyani Indrawati explained, the new law will regulate income tax, value-added tax, regional tax and regional user fees, and general tax provisions. But, she assured the existing law will still exist.

“Of course there are several articles that get input during the discussion in the cabinet meeting, we will reformulate and we expect to get a presidential letter to be submitted to the parliament in December,” she said after a limited meeting at the Presidential Office in Jakarta.

The minister said the omnibus law will revise the current tax code, income tax law, value-added tax law, and regional tax and retribution law. The new law will cut corporate income tax to 22 percent in 2021 and 2022 from 25 percent today. The tax will be lowered again to 20 percent from 2023 onward.

“I assume we can still make exercise in terms of revenue and loss of tax revenue. Even more important is that the design of the 2021 State Budget has taken into account the tax reduction from corporate tax. We hope there is compensation from the side of our better tax base,” she asserted.

The minister went on to say that companies that go public for the first time in 2021 and the years after will get a further discount of three percent for five years on their income tax.

“Thus, for those who go public, their income tax will decrease from 22 percent to 19 percent. And those who go public later in 2023, they will go down from 20 percent to 17 percent because it will drop 3 percent below the tariff,” she explained.

Furthermore, corporate or individual shareholders will no longer be required to pay tax on dividends they receive from local companies, Indrawati said. Today, the tax office takes a 10 percent cut for the state on any dividend.

Indrawati also stated that the government will lower income tax on interests, currently at 20 percent, to an undisclosed amount. It will be determined later by government regulation, she said, referring to a lower-tier regulation that can be issued without consultation with the House.

The bill, said the minsiter, would ease sanctions. For example, if a taxpayer corrects an annual notification and experiences underpayment, a penalty of 2 percent per month will be imposed. Within 24 months, the sanctions are burdensome because they can reach 48 percent. The minister stated that sanctions would be reduced per month pro-rata based on the benchmark interest rate on the market plus 5 percent.

The relaxation, she adds, would be given primarily to taxable companies who had not produced the products produced as tax objects. The bill would regulate that the input tax which had not been credited so far could now be credited or claimed to reduce tax liability. This will be applied to entrepreneurs who have been categorized as not taxable companies and are now taxable companies, she noted.

The government will also redefine the jurisdiction of local government when imposing local taxes or retributions. Indrawati said all new regional regulations on taxation will need approval from the president.

“We are concerned by regional tax revenues, but they need to be in line with the central government’s policy to create a better business climate,” she said.

Lastly, the reform will also include various tax breaks for investors, including tax holidays and super deduction taxes, the minister concluded.

Written by Lexy Nantu, Email: lexy@theinsiderstories.com