The Indonesian government has approved new tax measures aimed to boost 2022 revenues. The move aims to capitalize on increased spending demands following the contractions caused by the Covid-19 pandemic. There are five notable revisions, namely in the area of Value added tax (VAT), Income Tax Bracket, Tax Amnesty, Corporate Tax and Carbon Tax.
For VAT, the government is implementing a phased increase to 11% in April 2022 and to 12% in 2025. Estimations project a 1% hike in the VAT rate could potentially increase the country’s revenues by about 0.2 – 0.3% of GDP. With regards to the income tax bracket, a new bracket for those with annual earnings of more than IDR 5 billion (USD 345 million) was created. Additionally, the minimum taxable income has been increased by 5%.
Between January and June 2022, a fresh tax amnesty scheme will be introduced. Assets accumulated up to 2015 will be taxable at a 6 – 11% tax rate, while those acquired from 2016 onwards will be taxed at 12 – 18%. The prevailing corporate tax cut stands still at 22% and there is no update as to when an upcoming reduction to 20% will be carried out.
Lastly, a carbon tax of USD 2.1/metric ton will be applicable, starting with the coal power plants. According to estimates cited by Bloomberg, the amount is lesser than what is imposed by Singapore (USD 3.7/metric ton) and several European countries (USD 30 – 70/metric ton). Significant increases in revenues will be more likely when more industries are included under this scheme.