Companies give positive responses to govt tax cuts

The government step to offer cuts on income tax for firms willing to revaluate their assets, as promised in its economic policy package, has received positive responses from many companies.

Finance Minister Bambang Brodjonegoro is convinced that numerous companies have been interested in conducting asset revaluations to obtain tax incentives in the form of tax cuts. 

"Many companies, particularly in the financial sector, have positively responded to the policy and expressed their intention to carry it (the revaluation) out this year," the finance minister said on Monday.

Through this policy, the government offers tax incentives in the form of tax cuts on income tax from the previous 10 percent to the reduced six percent, four percent and three percent.

Bambang said that positive responses from companies convinced the government that it will be able to increase its tax receipts from companies carrying out asset revaluations. Companies will happily pay their income taxes after seeing reductions from 10 percent to six, four and three percent.

"According to the Directorate General of Taxation, many companies have expressed their intention to conduct asset revaluations and will pay their final withholding taxes. There have been indications that the state will receive at least Rp10 trillion in additional taxes this year," the minister said. 

In the fifth chapter of its economic policy package, the government offers tax incentives for companies willing to carry out asset revaluations. So far, many companies have not been willing to carry out revaluations due to the high rate of taxes.

With the tax rate reduction from 10 percent to six, four and three percent, as stated in the fifth government policy package, companies are expected to be encouraged to reevaluate their assets. 

The government announced its fifth economic policy package on investment and finance on Thursday, October 22, 2015.

Cabinet Secretary Pramono Anung said the new package is expected to boost economic growth and open new jobs. "The core of the package is the revaluation of assets, as outlined by Coordinating Minister for Economy Darmin Nasution and Finance Minister Bambang Brojonegoro," Pramono said.

Governor of Bank Indonesia Agus Martowardojo said the central bank appreciated the policies adopted by the government to shore up the flagging economy.

"We welcome the limited cabinet meeting with the opportunity for the revaluation of assets and prevention of double taxation on real estate investment classes," Agus said.

He added that the fifth policy package would open an opportunity for corporations to reevaluate their assets.

Asset revaluation would likely show that the assets of corporations are larger in value, it would also improve the health ratio needed by corporations to increase their capital, he said.

Darmin Nasution offered details of the policy in the revaluation of corporation assets and the prevention of double taxation on the real estate investment class.

Regarding tax incentives, Finance Minister Bambang said that if companies submit their revaluation proposals before the end of December 2015, with the implementation of the revaluation before the end of December 2015, they will receive an income tax cut from 10 percent to three percent.

Further, it they submit the revaluation proposal in the period between January 1, 2016 and June 2016, with the execution of the proposals on June 30, 2017, at the latest, they will be able to take advantage of a four percent final withholding tax, reduced from 10 percent. 

Additionally, companies that file their asset revaluation proposals from July- December 31, 2016, with the implementation of their asset revaluations at the end of December 2017, at the latest, will only pay a six percent final withholding tax, instead of 10 percent. 

Regarding other legal issues which concern the economic policy packages, Finance Minister Bambang said the government will soon issue all legal provisions in an effort to implement the policy package soon.

"Most constraints concern legal and regulation adjustments, because this needs time, but we will do our best to accelerate it, such as with the issuance of the finance minister decree on revaluations and the ministers decree on avoidance of double taxation. We hope that all of this will be positively responded to by the capital market. We also have to accelerate the drafting and issuance of the government regulations (PP) on deposit interest and bonded zones.

Over the past month, the government has announced six installments of economic policy packages that are seen as a bold step to reform the economy amid global economic uncertainty.

The policy packages cut regulations and simplify licensing procedures to assist with investments needed by the country to cope with the economic slowdown.

President Joko Widodo said the government would continue deregulation policies and issuing more policy packages.

Through the policy package the government wants to deliver a strong message to the public that it is serious and consistent in its move to transform the economic fundamentals.

"We want the people and the business community to know that we would continue to work hard for reforming both regulation and the bureaucracy," the president said

Source: ANTARA