Indonesia seeks to boost 2022 revenues with new taxes

• May 20, 2021

JAKARTA: Indonesia’s government proposed to parliament on Thursday a shakeup in tax policy, including introducing new levies, to help it boost next year’s revenues while reducing the budget deficit, the country’s finance minister said.

While the proposal brought up at parliament’s plenary meeting lacked details, it was still met with objections from several lawmakers who warned against hiking tax when the economy had not fully recovered from the coronavirus pandemic.

Finance Minister Sri Mulyani Indrawati said the government remained committed to supporting an economic recovery, but she also wanted to introduce structural tax reforms.

“The policy reform is aimed at expanding the tax base and finding new sources of revenue by improving value-added tax (VAT) collection and reducing its regressiveness,” she said, without elaborating.

The minister also proposed changes to individual income tax policy and a carbon tax.

The proposal came amid reports in local media that the government is considering raising the VAT rate, which is currently 10% and applied on nearly all sales of goods and services. Sri Mulyani did not bring this up and her ministry’s spokeswoman did not immediately respond to requests for comment.

Media has also reported a planned plastic excise tax in 2022, but the ministry’s customs chief Askolani said this was still under review.

Sri Mulyani also proposed that 2022 spending would be within a range of 14.7% to 15.3% of GDP, with a fiscal deficit of 4.51% to 4.85% of GDP, smaller than this year’s 5.7% deficit.

The budget proposal assumed an economic growth rate of 5.2% to 5.8%, compared with 5% growth assumed in this year’s budget. The economy contracted 2% last year, battered by the pandemic.

President Joko Widodo is expected to give parliament a more detailed 2022 budget proposal in August and lawmakers are expected to vote a few months after. ($1 = 14,395.0000 rupiah) – Reuters