After Years of Discourse, Will the Indonesian Government Finally Cut the Corporate Income Tax Rate to 20%?
For the past couple of years we have often heard high government officials in Indonesia say that the country’s corporate income tax (in Indonesian: Pajak Penghasilan Badan, or PPh badan) is planned to be cut in an effort to attract more direct investment.
Currently, Indonesia’s corporate income tax rate is set at 25 percent. Compared to several regional competitors this tax rate is not considered competitive enough. For example, in Singapore, authorities charge only 17 percent in corporate income tax, while in Vietnam (which is Indonesia’s biggest regional competitor in terms of attracting direct investment) the rate is set at 20 percent. Hence, if we focus solely on this corporate income tax rate, and leave out the whole political, economic and social context, then we can conclude that Indonesia is indeed somewhat less attractive for investors as they have to comply with a higher corporate income tax rate.
This article discusses:
• Why the Indonesian government wants to cut the corporate income tax.
• Is it risky to cut the corporate income tax rate? Is Indonesia joining a "race to the bottom"? Will Indonesia's tax revenue be undermined?
• Will fiscal incentives attract more investment or does it require more improvements in the country's investment climate to boost investment drastically?
Read the full article in the October 2019 edition of our monthly research report. You can purchase the report by sending an email to info@indonesia-investments.com or a WhatsApp message to the following number: +62(0)8788.410.6944
