Hans David Tampubolon, Jakarta – The Finance Ministry has issued a regulation that raises the non-taxable income threshold of individual taxpayers to Rp 24.3 million (US$2,524) per year, up from Rp 15.8 million previously, in a bid to maintain the population's purchasing power amid the global economic slowdown.
The decision took into consideration the rising prices of basic needs, said the spokesman of the Finance Ministry's taxation directorate general, Kismantoro Petrus, in a statement sent over the weekend.
"The new threshold is also needed as part of the government's measures to anticipate and to mitigate the current global slowdown, triggered by the financial crisis in Europe and in the United States, which has affected the public's purchasing power. By adjusting the rate, we hope to be able to increase and to maintain purchasing power, which hopefully can increase gross domestic product [GDP] through both consumption and investments," he added.
The idea to increase the non-taxable income threshold was proposed by President Susilo Bambang Yudhoyono, who said the government wanted to ease tax pressures on those who earned less than Rp 24 million per year.
Indonesia relies heavily on its demographics and its substantial domestic consumption rates to maintain economic growth during the current global downturn. The government has set an economic growth target of 6.8 percent in the 2013 state budget.
Kismantoro added that the decision to increase the limit had received approval from the House of Representatives during hearings on May 30 and Oct. 15, and the new non-taxable income level would take effect starting Jan. 1 next year.
The new regulation also has implications for families. Individual taxpayers with an unemployed spouse will receive an additional Rp 2.02 million income tax exemption under the tax structure, up from Rp 1.32 million in previous regulations.
Married couples filing jointly are entitled to a total of Rp 48.6 million in non-taxable income, up from Rp 31.6 million, if both spouses are employed.
Families are allowed a tax exemption on another Rp 2.02 million of their income per year for each child they have, an increase from Rp 1.32 million earlier, for up to a maximum of three children.