Indonesian parliament passes major tax revamp bill into law

The Indonesian parliament passed into law the country’s major tax reform bill on Thursday.

The law will focus on optimizing revenue collection and boosting tax compliance. This came as the government fund took a huge blow last year due to the COVID-19 pandemic.

The law proposes the VAT rate on practically all goods and services be increased from 10% to 11% in April 2022 and to 12% in 2025.

It would also maintain the corporate tax rate at 22%, rather than cutting it to 20% next year as previously planned.

A higher income tax rate for the wealthiest, a lower income tax rate for the majority of the population, a new carbon tax, and a new tax amnesty program were all approved by parliament.

Only one of the nine political parties in parliament, which is controlled by President Joko Widodo’s coalition, opposed the bill’s passage.

However, several business organizations and economists have criticised the timing of tax increases, citing the economy’s weak recovery from the pandemic.