Jakarta –
The government will add a layer of income tax rate for individual taxpayers (WP OP) by 35% for taxable income above Rp 5 billion per year or around Rp 416 million per month. It aims to better reflect justice.
“For the re-arrangement of fringe benefits, changing rates and the PPH OP bracket, we added 1 bracket, namely 35% for those whose income is above Rp 5 billion per year,” said Minister of Finance Sri Mulyani Indrawati in a working meeting Commission XI DPR RI, Monday (28/6/2021).
He explained that in the last five years only 1.42% of the total individual taxpayers made payments at the highest rate, namely 30%.
“When viewed from the reported taxable income, only 0.03% of the number of individual taxpayers who have taxable income of more than Rp 5 billion a year,” he said.
During the last 5 years from 2016 to 2020, 0.03% of OP taxpayers who earn more than IDR 5 billion a year contributed 14.28% of the total PPH OP owed in the last 5 years, which is IDR 84.6 trillion.
“Taxing the rich is not easy and not optimal because the arrangements are related to fringe benefits or various in-kind facilities that are enjoyed but are not subject to tax,” Sri Mulyani continued.
He explained that the current number of tax brackets in Indonesia is only 4, so it doesn’t describe progressivity. For comparison, Vietnam has 7 brackets, Thailand has 8 brackets, the Philippines has 7 brackets, and Malaysia has 11 brackets. It is sourced from the World Bank and PWC.
The former Managing Director of the World Bank said that this condition resulted in a less progressive PPH policy for individuals in Indonesia.
“This is the reason why we propose several articles to be added to our tax regulations,” he added.
(toy/zlf)
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