The Ministry Of Finance Is Reviewing The Holiday Tax Scheme

JAKARTA - The Ministry of Finance (Kemenkeu) is reviewing the tax holiday scheme because it will implement a global minimum tax (GMT) of 15 percent next year.

The global minimum tax of 15 percent is the result of the Pilar 2: Global Anti Base Erosion (GLOBE) agreement, with countries agreeing to apply tax minimum rates for multinational companies. This aims to reduce the practice of companies moving profits to countries with low taxes.

"Tax holidays still exist, but there is an adjustment to the tax context of a minimum of 15 percent," said Head of the Fiscal Policy Agency (BKF) of the Ministry of Finance Febrio Kacaribu, at the Ministry of Finance Office, Jakarta, quoted from Antara, Saturday, October 5.

For Indonesia, considering that the corporate Income Tax (PPh) is currently set at 22 percent, the tax exemption that the government can provide is 7 percent. This figure is obtained from reducing corporate income tax by 22 percent and global minimum tax by 15 percent.

Febrio admits that the implementation of this policy has the potential to reduce the interest of entrepreneurs in investing in Indonesia. However, the government will continue to implement this minimum tariff requirement to ensure that taxpayers' incomes that are not taxed by Indonesia are not subject to a top-up tax by their home countries, so that Indonesia still has the right to taxes.

"If we apply tax exemptions that are up to 0 percent, then 15 percent of them will be collected by their home countries. That is the same as we subsidize the state budget for other countries. We don't want that," he said.

Instead, the government will seek alternative incentives that can compensate for taxpayer obligations of 15 percent. The incentives given will be the majority in the form of fiscal incentives.

"But the shape is not a tax holiday anymore which is up to 0 percent. Tax holidays are up to 7 percent in the Indonesian context. For 15 percent we will think about it later. We are also thinking about it with the Ministry of Investment/BKPM," he also said.

The global minimum tax deal of 15 percent was initiated by the OECD/G20 Inclusive Framework to tackle tax evasion practices by multinational companies. Pillar 2 aims to ensure that large multinational companies (MNC) pay a minimum tax of 15 percent in any country they operate, without taking into account where they report profits.

This policy-affected multinational company is the global revenue of more than 750 million euros.

If the company pays a tax below 15 percent in a jurisdiction, the company's home country can add an additional tax (top-up tax) to a minimum of 15 percent. For example, if a company is only subject to a 5 percent tax in a country, the country of origin can add an additional 10 percent tax.

Thus, this policy can increase justice in the international tax system while increasing state tax revenues, especially in developing countries.