Indonesia Targets Corporate Tax Cut to `Competitive' 20 Percent

  • Government aims to lower tax this year, Finance Minister says
  • Corporate tax move will need approval from parliament

Indonesia plans to cut corporate tax to 20 percent this year, from 25 percent, as it tries to attract investment to spur the economy.

The move will need parliamentary approval, Finance Minister Bambang Brodjonegoro said on Monday. A 20 percent rate will be “competitive,” he said.

“If possible we will discuss it immediately, this year,” Brodjonegoro said. “We’re seeking a figure that’s in line with neighboring countries but also not too far from other Asean countries. So we think 20 percent is still competitive in Asean.”

Plans for a tax cut come as President Joko Widodo’s government is falling short of its revenue collection targets, putting its 2016 budget spending plans at risk. Lawmakers are holding up the government’s bill for a tax amnesty, aimed at raising more than $4 billion by persuading Indonesians to bring home money from overseas.

Indonesia will gradually cut its corporate tax rate to around 17.5 percent to discourage companies from booking profits in lower-tax countries such as Singapore, Luhut Panjaitan, then the president’s chief of staff, told Bloomberg in an interview in May last year. Singapore is one of the top three destinations for Indonesians to keep funds overseas, along with the British Virgin Islands and the Cook Islands, Brodjonegoro said.

The government will chase funds in these three countries and is using information in the Panama Papers to complement its tax collection efforts, he said.

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