The country is planning to tax the rich more to boost state revenue to help it pull through a health crisis and an economic recession caused by the Covid-19 pandemic.
The government is proposing a 35% personal income tax for high-net-worth individuals with earnings of over five billion rupiah (RM1.4mil) a year.
South-East Asia’s largest economy currently has four tax brackets, ranging from 5% to 30%, for those with annual income of less than 50 million rupiah (RM14,450) to above 500 million rupiah (RM144,500).
Tax office spokesman Neilmadrin Noor said that when approved by Parliament, the tax reform would help “strengthen the state budget”, while also enhancing taxpayers’ compliance.
He added that the new tax rate would affect rich Indonesians, including those living overseas who have Indonesian tax identification numbers.
The government will devise a supervision strategy and set up an administration to mitigate tax avoidance, he said.
The new tax rate is among a few measures outlined in a taxation Bill as part of a major overhaul of the tax system. Others include a carbon tax and a rise in value-added tax rates.
Indonesia has seen an estimated budget deficit of 6% of the gross domestic product (GDP) last year, due to massive spending on cash aid, social security and economic recovery programmes to cope with the Covid-19 pandemic that has killed over 53,000 and infected 1.92 million of its population.
The government must gradually narrow the gap to at most 3% by 2023. — The Straits Times/ANN