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Ministry of Finance o f the Republic of Indonesia. Tax Policy in Indonesia. Presented by : MAHENDRA SIREGAR Vice Minister of Finance of The Republic of Indonesia for The Conference on Profit Generating Environmental Investment in Agri-business 29 th February 2012 Sultan Hotel, Jakarta.

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tax policy in indonesia

Ministry of Finance

of the Republic of Indonesia

Tax Policy in Indonesia

Presented by :

MAHENDRA SIREGAR

Vice Minister of Finance of The Republic of Indonesia

for

The Conference on

Profit Generating Environmental Investment in Agri-business

29th February 2012

Sultan Hotel, Jakarta

outline
Outline
  • Overview of the Indonesian Taxation
  • Tax and Non Tax Revenue Trends
  • 2012 Indonesian Fiscal Policy
  • The Indonesian Tax Incentives
  • The Recent Investment Growth in Indonesia
  • Conclusion
overview of the indonesian taxation
Overview of the Indonesian Taxation
  • Self Assessment System
  • Types of Tax:
    • Income Tax
      • Individual : progressive rate 5%-30%
      • Corporation
        • Before 2009 : progressive rate 10%-30%
        • 2009 : flat rate 28%
        • 2010 onwards : flat rate 25%
      • Small and Medium Enterprise : 50% lower (terms & condition applied)
    • Value Added Tax (VAT): flat rate 10%
    • Property Tax : flat rate 0.5% (effective rate 0.1%)
    • Stamp Duty : 2 rates (IDR 3000 and IDR 6000)
  • Customs and Excises:
      • Import Duties:
          • Most Favoured Nations
          • Preference
      • Export Duties
      • Excises

Trends of Average Import Duties

international cooperation
International Cooperation
  • Multilateral Convention on Mutual Assistance in Tax Matters

International Cooperation

slide5

Tax Revenue Growth

(2006 – 2012)

Percent

IDR Trillion

Budget

Revised Budget

Other

Excise

VAT

Income Tax

  • 2006-2012: Tax Revenue increased by 2.5 times, from IDR 409,2 T (2006) toIDR 1.019.2 T (2012).
  • Average growth is 17% annually.
  • 2011–2012: Tax revenue increased by 17.5%; Non-oil tax revenue increased by 22.2%.
slide6

Non Tax Revenue (2006 – 2012)

Percent

IDR Trillion

Revised Budget

Budget

Ratio of Non Tax Revenue /Domestic Revenue

BLU

SOE Dividend

Other

Natural Resources

  • During the period of 2006-2012, Non Tax Revenue increased by 6% annually.
  • Natural Resources, particularly the Oil and Gas, have been the primary sources of non tax revenue.
slide7

2012 Indonesian Fiscal Policy

The Government Mission for the year 2012:

Acceleration and Expansion of the Qualified Economic Growth, Inclusive and Fairness

to Improve People’s Welfare

4 Pillars of Development

Pro Growth

Pro Job

Pro Poor

Pro Environment

Fiscal Policy Direction for the year 2012

Support the economy (by providing fiscal stimulus) while maintaining economic stability and fiscal sustainability

Taxation Policy Strategies

  • Tax Reform and Modernization:
  • Equality
  • Simplicity
  • High integrity

Encourage Direct Investment by Providing Tax Incentives for

Priority Sectors/Industries/Regions

7

logical framework for tax incentives formulation
Logical Framework forTax Incentives Formulation
  • INTERNAL CONESIDERATION
  • Economic and sector development strategy
  • Regional development importance.
  • Incentive goals
  • Multiplier effect
  • Synchronization with other linked policies
  • INDUSTRY/BUSINESS CRITERIA
  • Pioneer
  • High Priority
  • INCENTIVE BY INDUSTRY/ BUSINESS CRITERIA
  • Pioneer
  • High Priority
  • BASIC PRINCIPLES
  • Economic impact (Cost-Benefit analysis)
  • Administrative efficiency
  • Efficient and effective

GENERAL PATTERN IN TAX INCENTIVE

Tax Incentives to attract investment

COMBINATION

  • INCENTIVE BY REGION
  • Developed Region
  • Developing Region
  • Undeveloped Region
  • EXTERNAL CONSIDERATION
  • International best practice
  • Competitiveness Intensity
  • International commitment
  • REGIONAL CLASSIFICATION
  • Developed Region
  • Developing Region
  • Undeveloped Region
overview of indonesia fiscal incentives to promote direct investment
OVERVIEW OF INDONESIA FISCAL INCENTIVES to Promote Direct Investment
  • TAX ALLOWANCE:
  • Investment Allowance (30% of investment)
  • Accelerated Depreciation
  • Dividend Tax Discount
  • Period Extention for carry forward Loss

High Priority Business Sectors/ Areas In The National Scale

Income Tax

TAX HOLIDAY:

Income tax relief for 5-10 years period after commencing the commercial production period.

50% Income tax reduction from Income Tax payable for additional 2 years period.

Pionir Industry

slide10

Amid the Uncertainty of Recent Global Economy,

Indonesia Regained the Investment Grade from Fitch and Moody’s ....

INVESTMENT GRADE

(18 January 2012)

INVESTMENT GRADE

(15 December 2011)

2010

Moody’s

(Ba3 Stable Outlook)

S&P(BB+ Positive Outlook)

Fitch(BBB- Stable Outlook)

2009

2011/2012

2008

Ba3  Ba2

BB-  BB

BB  BB+

2007

BB-

Ba2

BB

BB+

BB-  BB

Ba3

2006

BB-

B1  Ba3

2005

BB-

BB-

B2  B1

2004

BB-

B+  BB-

B2

2003

B+

B+  BB-

B2

B  B+

B+

B3  B2

B-  B

B  B+

The position of Indonesia investment grade reflects the strength and resilience of economic growth amid the global economic slowdown, fiscal discipline, strong external liquidity, and the prudent of macroeconomic, fiscal and monetary policies.

Source:

Moody’s, S&P, Fitch

slide11

The Growth of

Direct Investments in Indonesia

Foreign Direct Investment (PMA) and Domestic Direct Investment (PMDN)

Source: Bank Indonesia,Indonesian Statistic Board

Realization of Foreign Direct Investment (FDI/ PMA) and

Domestic Direct Investment (DDI/PMDN)

remain strong and positive.

conclusion
Conclusion
  • Indonesia is still continuing its tax reforms to establish more efficient tax administration and to give more equality for taxpayer.
  • The reforms are performed together with the implementation of prudent tax policy and the introduction of competitive tax incentives.
  • Those together are aiming to encourage direct investment in order to ensure sustainable development in Indonesia
thank you

Ministry of Finance

of the Republic of Indonesia

THANK YOU