PEARSON PLC ORD 25P  PSON.L 
$1,031.63  $5.63  0.55%  
DIAGEO PLC ORD 28 101/108P  DGE.L 
$2,505.00  $8.50  0.34%  
RECKITT BENCKISER GROUP PLC ORD  RKT.L 
$4,439.00  $54.00  1.20%  
LLOYDS BANKING GROUP PLC ORD 10  LLOY.L 
$59.22  $0.44  0.74%  
MELROSE INDUSTRIES PLC ORD GBP0  MRO.L 
$552.80  $3.40  0.61%  
FRESNILLO PLC ORD USD0.50  FRES.L 
$592.00  $15.00  2.47%  
NATWEST GROUP PLC ORD 107.69P  NWG.L 
$332.02  $5.48  1.62%  
WEIR GROUP PLC ORD 12.5P  WEIR.L 
$1,872.00  $41.00  2.14%  
STANDARD CHARTERED PLC ORD USD0  STAN.L 
$707.80  $13.60  1.89%  
ENDEAVOUR MINING PLC ORD USD0.0  EDV.L 
$1,745.00  $61.00  3.38%  
OCADO GROUP PLC ORD 2P  OCDO.L 
$412.47  $1.37  0.33%  
ANGLO AMERICAN PLC ORD USD0.549  AAL.L 
$2,225.50  $3.50  0.16%  
ASHTEAD GROUP PLC ORD 10P  AHT.L 
$5,142.00  $100.00  1.91%  
SEGRO PLC ORD 10P  SGRO.L 
$892.83  $8.37  0.93%  
BAE SYSTEMS PLC ORD 2.5P  BA.L 
$1,239.50  $20.00  1.59%  
VODAFONE GROUP PLC ORD USD0.20   VOD.L 
$69.06  $1.38  1.96%  
HSBC HOLDINGS PLC ORD $0.50 (UK  HSBA.L 
$655.00  $8.00  1.21%  
GLENCORE PLC ORD USD0.01  GLEN.L 
$426.80  $6.55  1.51%  
ROLLS-ROYCE HOLDINGS PLC ORD SH  RR.L 
$435.40  $8.50  1.91%  
UNITE GROUP PLC ORD 25P  UTG.L 
$908.50  $13.50  1.46%  
ANTOFAGASTA PLC ORD 5P  ANTO.L 
$1,905.00  $41.00  2.11%  
CRODA INTERNATIONAL PLC ORD 10.  CRDA.L 
$3,993.00  $66.00  1.63%  
KINGFISHER PLC ORD 15 5/7P  KGF.L 
$273.10  $4.40  1.59%  
SPIRAX GROUP PLC ORD 26 12/13P  SPX.L 
$8,570.00  $60.00  0.70%  
TAYLOR WIMPEY PLC ORD 1P  TW.L 
$154.65  $1.95  1.25%  
WPP PLC ORD 10P  WPP.L 
$722.80  $18.60  2.51%  
RIO TINTO PLC ORD 10P  RIO.L 
$4,908.00  $29.50  0.60%  
HOWDEN JOINERY GROUP PLC ORD 10  HWDN.L 
$916.50  $31.00  3.27%  
MONDI PLC ORD EUR 0.22  MNDI.L 
$1,538.00  $16.00  1.03%  
HARGREAVES LANSDOWN PLC ORD 0.4  HL.L 
$1,094.50  $1.50  0.14%  
BARRATT DEVELOPMENTS PLC ORD 10  BDEV.L 
$503.80  $2.80  0.55%  

Indonesia Grapples with Business Backlash Over Tax Hike Ahead of 2024 Presidential Election

by Rahil M
0 comment

Maulana Yusran, Secretary General of the Indonesian Hotel and Restaurant Association (PHRI), expressed frustration, stating that the timing of the tax hike hindered the industry’s recovery from the pandemic.

As Indonesia prepares for its upcoming presidential election, the government’s recent and potential tax hikes have triggered a wave of discontent among businesses, particularly in the leisure and tobacco industries. The move comes at a challenging time for the nation, still grappling with the economic aftermath of the Covid-19 pandemic.

Last month, a significant increase in the leisure tax for nightclubs, bars, spas, and karaoke clubs raised concerns within the business community. The tax rate surged to at least 40% up from as little as zero, with a ceiling set at 75%. Local governments, especially in popular tourist destinations like Bali and Yogyakarta, now have the authority to determine the specific rate within this range, potentially impacting the competitiveness of Indonesia’s tourism industry.

Maulana Yusran, Secretary General of the Indonesian Hotel and Restaurant Association (PHRI), expressed frustration, stating that the timing of the tax hike hindered the industry’s recovery from the pandemic. With neighbouring countries such as Thailand, Malaysia, and Singapore already popular among tourists, the increase in prices could divert travellers to other destinations, undermining Indonesia’s efforts to boost its tourism sector.

This leisure tax escalation follows closely on the heels of a 10% to 15% increase in excise taxes for cigarettes and e-cigarettes, causing apprehension among producers like Gudang Garam and HM Sampoerna. Indonesia, known for having one of the highest smoking rates globally, faces challenges as consecutive years of tax hikes threaten to impact sales and company stocks.

Adding to the concerns is the impending hike in the value-added tax, set to increase to 12% from 11% by January 1, 2025, according to the 2021 law on tax harmonization. Meanwhile, the expiration of income tax discounts for micro, small, and midsize enterprises (MSMEs) further compounds worries for businesses, potentially affecting their competitiveness.

Attempting to address the concerns of MSMEs, the tax office clarified that there would be no increase in tax rates for this sector. However, the return rates after the discount period ends raise uncertainties for these enterprises, prompting fears of increased financial burdens.

In response to the backlash, Tourism Minister Sandiaga Uno announced the cancellation of the tax hikes last week. However, industry associations, including the PHRI and the Indonesian Tourism Industry Association, are proceeding with plans to file a judicial review against the leisure tax hike. The uncertainty surrounding regional administrations’ adherence to the cancellation has prompted the associations to pursue legal avenues.

The government’s broader economic policies are also under scrutiny, with a plan to promote electric vehicles by disincentivizing internal combustion engine vehicles sparking public outcry. The government’s intention to raise taxes on conventional motorcycles adds another layer of concern, potentially impacting both consumers and the automotive industry.

Luhut Pandjaitan, coordinating minister for maritime affairs and investment, highlighted the government’s commitment to environmental initiatives during the launch of Chinese EV giant BYD’s electric cars in Indonesia. However, the move to increase taxes on conventional motorcycles has raised questions about the overall impact on the nation’s transportation sector.

Amid these tax hikes, the government faces challenges in meeting its target of an 8% increase in tax revenue to 2,309.9 trillion rupiah in 2024. Declining windfalls from exports of key commodities, including palm oil, coal, and nickel, have led to a need for domestic revenue sources.

Bhima Yudhistira, director of the Center of Economic and Law Studies, believes that the tax increases are geared toward financing populist policies ahead of the presidential election. Those policies include the first pay rise for civil servants in five years and various social safety net programs, indicating a cyclical pattern coinciding with national elections every five years.

The significant increase in Indonesia’s social protection budget for 2024, amounting to 496.8 trillion rupiah, reflects the government’s commitment to populist spending. However, Yudhistira warns that such measures could burden businesses and impact the middle class, potentially leading to lower economic growth if fiscal policy distortions persist.

As Finance Minister Sri Mulyani Indrawati faces pressure to finance these populist programs and amid rumoured disagreements with Defense Minister Prabowo Subianto, speculation about her potential resignation has emerged. The uncertainty surrounding economic policies and taxation raises questions about Indonesia’s economic trajectory in the coming years, with businesses closely monitoring developments as the presidential election approaches.

You may also like

Leave a Comment

Subscribe to Our Newsletters

We are a UK-based business awards firm that specializes in recognizing and celebrating exceptional achievements across various sectors. Our team of experts is dedicated to delivering world-class services, including event management, judging, and award design. With a focus on quality and excellence, we aim to showcase the best of international businesses and inspire future success.

Contact us: [email protected]

© 2022 – The Business Pinnacle. All Right Reserved. Developed by Aapta

The Business Pinnacle