As Commodity Prices Normalize, Here's the Impact on Taxes

Monday, 15 May 2023

As Commodity Prices Normalize, Here's the Impact on Taxes

JAKARTA. The Ministry of Finance revealed a number of impacts caused by the normalization or decline in commodity prices on tax revenue.

For information, the tax revenue target in 2023 set by the government is IDR 1,718 trillion or up to 16% from last year's target.

Quoted from, the Minister of Finance's Expert Staff for Tax Compliance Yon Arsal said the impact of commodity price normalization on revenue will occur indirectly.

Rather, it will go through various channels. First, the decline in commodity prices will affect the production side of companies or corporate taxpayers.

If that happens, the trend of layoffs will increase. As a result, employee tax revenue or Income Tax Article (ITA) 21 will be depressed.

However, according to Yon, until now, ITA 21 revenue is relatively stable. According to the Ministry of Finance's records, until the end of March 2023, the revenue of ITA 21 was recorded at IDR 49.92 trillion, up 21.6% from the realization of the same period in 2022.

In fact, the increase in ITA 21 revenue in the first quarter of 2023 was higher than the growth in the first quarter of 2022 which only amounted to 18.8%.

In addition, the decline in domestic corporate production will also result in pressure on the revenue of ITA 29, namely the underpayment of Income Tax contained in the Annual Corporate Income Tax Return.

The underpaid income tax is the difference between the income tax payable from the tax year concerned minus the tax credit for that year and ITA 25.

According to Yon, if the decline in commodity prices lasts a long time and disrupts the company's performance, the company will apply for a reduction in ITA 29.

Even so, this will not have an impact on overall tax revenue, because the taxpayer will not immediately reduce income tax, considering that it has just been paid for the profits of the previous tax year. (ASP/KEN)


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