Jakarta – Indonesia's parliament has approved income tax cuts that halve the burden on low income earners, as well as a radical new amendment that will provide regional administrations with 20 percent of income tax receipts, reports said Tuesday.

Finance Minister Bambang Sudibyo said the amendments were designed to broaden the tax base, improve tax administration and ensure a fairer distribution of the tax burden, the Jakarta Post said. The amendments on five tax laws were approved by a plenary session of the parliament on Monday after more than a month of deliberation.

The new income tax law, one of the five tax laws amended, now splits individual taxpayers into five brackets from the previous three. Earners of below 25 million rupiah (2,800 dollars) now have to pay five percent in income tax, half of what they paid earlier.

Those earning between 25 and 50 million rupiah have to pay 10 percent, and those making between 50 and 100 million rupiah have to pay 15 percent. A 25 percent income tax would be levied on those earning between 100 million and 200 million rupiah while the top 35 percent tax will be paid by those earning over 200 million rupiah. Under the previous system, revenues of up to 25 million rupiah were taxed at 10 percent, up to 50 million rupiah 15 percent and those in excess of 50 million rupiah were taxable by 30 percent.

The income tax law will also extend the categories of corporate income tax payers to include non-profit social and political organizations as well as social-oriented foundations.

Until now regional administrations have simply been allotted budgets by the central government, with no reference to the amounts of taxes collected locally. The government's tax receipts account for only some 12 percent of gross domestic product.

Under amendments to the value added tax and luxury tax law, regional administrations can now raise luxury sales taxes to a maximum of 75 percent compared to the previous maximum of 50 percent.

Under the amendments to the law on general rules and procedures for taxation, individual and corporate taxpayers could now defer their tax payment by one year, if they are able to prove they are facing severe cash flow problems. The procedures for the refund of excess income tax and value added tax payments were also simplified.