Retno Ayuningtyas, Jakarta – The Tax Office has said it does not have enough time to execute a plan to cut the corporate income tax from 25 percent to 20 percent by the end of this year, delaying a key promise from President Joko "Jokowi" Widodo who has been fighting for the tax cut to boost investment.
Robert Pakpahan, the tax director general at the Finance Ministry, said the plan would necessitate the revision of a 2007 law, which needs deliberation and approval at the House of Representatives.
"There are only a few months left this year. There's just not enough time," Robert said.
It is also not known how the House would react to the cost of the plan which, according to a study conducted by the ministry, may cause a loss to the government of up to Rp 87 trillion ($6.1 billion).
This is around the same amount of the combined budget for healthcare, environment protection and tourism this year.
The government still has not submitted the bill for the tax cut to the House, which will have new legislators sworn in this October, Robert said.
The corporate income tax cut was a directive from President Jokowi who desperately wants to make investment in Indonesia more competitive.
Indonesia currently has one of the highest corporate income tax rates in Southeast Asia. Only the Philippines charges a higher income tax at 30 percent.
For the rest, Myanmar charges 25 percent; Laos and Malaysia 24 percent; Thailand, Vietnam and Cambodia 20 percent. Singapore charges the lowest income tax in the region at 17 percent.
Yustinus Prastowo, the head of the Center of Indonesian Taxation, said the government should start preparing the bill to get it through parliament. They will have to conduct a public consultation on the bill, draft it and then hold a public hearing before submitting it to the House.
"Meanwhile, President Jokowi can signal his intention to the public by announcing the main points of the bill," Yustinus said.