Government of Indonesia Offers 50% Discount on Income Tax
The government of Indonesia offers a new incentive to entrepreneurs in Indonesia's footwear and textile (and textile products) sectors who employ at least 2,000 workers and export 50 percent of their total sales. Authorities give a 50 percent discount on income tax to those workers that earn a maximum IDR 50 million (approx. USD $3,850) per year. Both Indonesia's footwear and textile sectors have been plagued in recent years by slowing economic growth, the weak rupiah and rising minimum wages.
Indonesian President Joko Widodo said this incentive will hopefully enhance competitiveness of export-oriented companies in the footwear and textile industries. As such, it should also improve job creation in Southeast Asia's largest economy and therefore cause a sliding unemployment rate.
The 50 percent discount for those who earn less than IDR 50 million per year, implies that the tax rate drops to 2.5 percent (from 5 percent previously). This rate will apply from July 2016 to December 2017.
To be able to obtain this incentive the footwear and textile companies have to include their workers in Indonesia's healthcare and social security programs that are run by the country's Badan Penyelenggara Jaminan Sosial (BPJS Kesehatan).
Ade Sudrajat, Chairman of the Indonesia Textile Association (API), said this new incentive will not have a big impact because there are relatively few workers that fall under the scope of the incentive.