Page 10 - Indonesia Taxation Quarterly Report (Q4-2019)

INDONESIA TAXATION QUARTERLY REPORT Q4-2019

The idea is to ensure investors that how to minimize the burden and ease
there will be no differences in treatment up the process in region. If this phase
wherever they intend to invest. In short, can go well, the next round in the future
tax is ought to be non-distorting toward should be more predictable since
business decision making. the local governments should have
similar understanding with the central
So, it seems that under Omnibus Law, government.
new balance is going to be redefined
to achieve what is best for both local To ensure that, derivative regulations
tax revenue and the economy. Before should be able to clarify the process in
presenting a critical view on how to get detail, including what corridor of policy
the right balance, this chapter starts by design should be followed, how long the
elucidating the challenges faced by local local government should change its tax
governments and how they are going rate when being intervened and other
to face them. This way, we can have a technicalities.
more holistic idea on how investment
can be boosted without sacrificing local Second, we should note that tax burden
revenue performance. is not only determined by the tax rate, but
also the tax base calculation. The central
The main change is, as stated by General government should ensure that there
Director of Fiscal Balance of Ministry will be no ‘room’ in the regulation that
of Finance, Astera Primanto Bhakti, can be exploited to violate the spirit of
the omnibus law will open the gate for the omnibus law. The local governments
central government to set the tariffs. The need to be confident that the law will
purpose is to eliminate differences of tax be reliable and not be tricked by other
treatment between regions in Indonesia, regions.
so that tax would not distort the decision
making of investors in choosing which Third, we cannot deny that the taxation
regions they wish to put their capital. The omnibus law plan will potentially limit
determination then will be determined the local governments’ freedom in
accordingly through further regulations. deciding what is best to improve their tax
collection performance. Consequently, at
Given the current situation and the least in the near future, it will be likely that
direction where we are going, it is logical local governments would still rely on the
that the central government wants to transfer fund from central government in
ensure that central and regions have the their budget. With that said, the central
same spirit in advancing development. government should have considered this
Disparity between the two would result in their fiscal balance policy.
downturn in both fiscal and investment.
However, it is without risks afterwards for Fourth, there should be assurance that
the central government in implementing any local laws that are to be changed
the omnibus law. are to be conducted in a way that would
not create law unambiguity or otherwise
First, if the central government is about there could be potential resistance. As
to intervene certain local tax rate, there we know, in 2017, Constitutional Court
will be ‘costs’ incurred, either in terms (Mahkamah Agung) has shut down
of time, energy and also politics. The the central government’s autonomy
related region should put effort to revise in revoking local regulations. If the
its law and all related instruments. In central government is to succeed the
other words, every intervened local objective of the taxation omnibus law,
governments will certainly add the total then the procedure needs to be heavily
costs arise due to the revision. formulated in certain way that would
result in harmony.
To anticipate and minimize this, the
central government should consider

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