Finance Minister Sri Mulyani Indrawati said the series of amendments in the law were aimed at creating a tax system with greater justice and effectiveness in order to increase the tax ratio.
By
Kompas Editor
·3 minutes read
The Law on Harmonization of Tax Regulations was endorsed on Thursday (7/10/2021) with several new rules that are quite important.
This law covers nine chapters and 19 articles. The five subject matters contained are the Personal Income Tax (PPh) and Corporate PPh, the Value Added Tax (PPN) regulation, general tax provisions and procedures, the voluntary disclosure program and carbon tax application.
Finance Minister Sri Mulyani Indrawati said the series of amendments in the law were aimed at creating a tax system with greater justice and effectiveness in order to increase the tax ratio. The changes were also intended to enhance tax payment obedience.
Through the law, the government wants to maintain a strong and even domestic tax base so that state income will not be easily disturbed. The new law is part of the taxation reform in the government’s effort to accelerate the national economic recovery.
We are undergoing a situation never before imagined, where the Covid-19 pandemic has disturbed state revenue. At the same time, government expenditure has had to increase in response to the need to deal with health problems and provide social protection for the public.
One of the decisions considered able to offer a sense of justice is the increase of the PPh rate to 35 percent for people with an income of Rp 5 billion (US$350,709) and over per year. Previously, the tax rate imposed was 30 percent for income over Rp 500 million per year. The increase of value added tax (PPN) on a number of tax objects from basic materials to educational services has also been halted throughout the pandemic but is to be adjusted again in phases until 2025.
Taxes as a fiscal instrument also function to minimize income disparity, especially when the Indonesian economy grows larger and technological companies develop.
Yet the PPh and PPN rate increases are not expected to be a disincentive for individuals and companies.
The tax reform is expected to improve the ratio of tax revenue against the national economy, which has so far stuggled to rise above 10 percent. Yet the PPh and PPN rate increases are not expected to be a disincentive for individuals and companies.
The PPN increase could reduce consumption if income does not rise. Therefore, apart from raising tax rates, the government should also create quality job opportunities and increase the number of middle-class people as payers of PPh at the same time as payers of PPN as consumers.
The tax reform promises certainty, modesty and simple tax administration. We hope that while preventing any abuse by tax officers, it will also encourage business players, particularly small and medium enterprises, to become obedient taxpayers.
Lastly, we wish to see the taxes we pay return in the form of functional government services such as that of population, health, education as well as infrastructure in its broadest sense, managed better and fairer for the public.