Jakarta to cut corporate tax

Bambang Brodjonegoro. Source: Flickr


The Indonesian government plans to cut corporate taxation to 20 per cent this year, down from 25 per cent, as it tries to bring investment home to boost economic growth, using the Panama Papers leak as evidence.

Finance Minister Bambang Brodjonegoro said the 20-per-cent rate would be “competitive”.

“If possible we will discuss it immediately, this year,” Brodjonegoro announced. “We’re seeking a figure that’s in line with neighbouring countries but also not too far from other Asean countries. So we think 20 per cent is still competitive in Asean.”

The move will need parliamentary approval.

President Joko Widodo’s government is failing to meet its revenue-collection targets, putting its budget spending plans in peril. MPs are delaying the government’s bill for a tax amnesty, which hopes to generate more than US$4 billion by persuading Indonesians to repatriate offshore cash.

Jakarta would incrementally cut the nation’s corporate tax rate to around 17.5 per cent to discourage companies from booking profits in lower-tax countries, such as Singapore, said Luhut Panjaitan, then the president’s chief of staff, a year ago.

Singapore was one of the three main jurisdictions for Indonesians to keep funds overseas, with the others being the British Virgin Islands and Cook Islands, Brodjonegoro added.

The authorities were pursuing funds in these three destinations while using details from the so-called leaked Panama Papers to complement efforts, he explained.

Around 79 per cent of the names of Indonesian citizens with assets in offshore companies disclosed by the leak were the same as those already received last year by the government.

Indonesia received the names from other G20 members during last year’s summit, Brodjonegoro said.

“We have cross-checked the data from the Panama Papers with the names in the accounts believed to have money in foreign countries. And we are certain that 79 percent of the names (in the two sources) are the same,” the minister told a House of Representatives banking and finance committee.

He said that the Tax Directorate General had already estimated that 6,000 Indonesians kept cash offshore and when combined, their funds exceeded Indonesian gross domestic product.

“We have detailed data, including the names, their banks, account numbers and the copies of their passports,” he said.

The 6,000 names included civil servants and politicians, he said.

He said: “So far the Tax Directorate General actually had got data about tax evaders but because they had relations with power holders and capital owners, tax officials could do nothing.”