Page 6 - Indonesia Taxation Quarterly Report (Q1-2019)

Executive Summary

Executive Summary

Current Developments Taxable Services of which the Exports
are Subject to VAT (PMK 32/2019). This
Departing from last year, Indonesia’s certainly adds to the list of relaxation
economic fundamentals remain robust given by the government in the previous
to enter 2019 which is a year full of year, such as tax holiday incentives,
uncertainty in light of the Presidential provision of accelerated refunds, or
Election and global economic turmoils. discounted tax rates for Small Medium
Until the first quarter this year, the Enterprises (SMEs). The discourse
economy has indicated a slowdown due on reducing the tax burden was also
to weakening demand and investors’ frequently discussed prior to the
tendency to wait for the election results. election, such as the reduction in rates
This results in unsatisfactory tax revenue for corporate and employee income
performance. taxes.

During the first quarter of 2019, the Nevertheless, efforts to expand the tax
realization of non-oil and gas taxes base and enforce compliance are still
reached 15.5% of the State Budget target. carried out by the government. This is
This result is basically a usual monthly realized through the implementation
distribution pattern that is prevalent at of Automatic Exchange of Information
the beginning of the year, which is around (AEoI) and the establishment of
4.5-6% per month. However, attention criteria for Permanent Establishment
must be given to the growth which only (PEs) through MoF Regulation
reached 0.6% which was mainly due to Number 35/PMK.03/2019 concerning
the negative Value Added Tax (VAT) the Determination of Permanent
performance. This is clearly far below Establishments (PMK 35/2019). Other
the growth target of tax revenues of 19% efforts are carried out through regional
in 2019. In the next quarter, however, tax coordination at the ASEAN level to
the performance of VAT is expected to combat illegal economic activities and
increase and will improve the growth expanding the tax treaty network. This
of tax revenue in general. Imports of shows that even though the government
auxiliary raw materials and capital seeks to build a tax system that
goods and domestic consumption are supports economic competitiveness,
likely to improve in line with the certainty the expansion of the tax base and
resulting after the election and the enforcement of compliance to encourage
upcoming Eid. revenue performance remain priorities.

Despite the low revenue performance, Meanwhile, the customs and excise
the government has provided ‘relaxation’ sector has shown far improved revenue
through expanding the scope of performance in terms of revenue and
service exports subject to 0% VAT growth. However, the increase in the
regulated through Minister of Finance performance of excise tax is worried to
Regulation (MoF Regulation) Number cause a saturation for business players
32/PMK/010/2019 concerning the who are subject to excise tax since there
Limitations of Activities and Types of is no addition of new excise objects.

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