Under Review: Government May Resume Covering Income Tax Article 21 for Employees

JAKARTA. To boost public purchasing power, the government is considering reinstating the Income Tax Article 21 (ITA) borne by the government. This facility was previously provided during the economic recovery period after the COVID-19 pandemic.

The increase in purchasing power is expected to stimulate public consumption, which, in turn, can drive business growth. If business activities accelerate, this could positively impact tax revenue.

Quoting Bisnis.com, according to Secretary General of the Ministry of Manpower Anwar Sanusi, the study was conducted by the government after receiving input from the Indonesian Employers Association (Apindo). 

Apindo hopes that with the provision of the government-borne ITA 21 facility, there will be no need for additional tax revenue sources through an increase in the Value-Added Tax (VAT) rate to 12%.

Government Has Not Decided

However, the government has not confirmed whether it will proceed with the proposal or not. “Once the discussions are complete, we’ll announce it,” said Anwar on Thursday (31/10).

Previously, during the economic recovery phase, the government provided an income tax facility for taxpayers in labor-intensive sectors. 

The aim is that the income received by employees in this sector is not deducted by ITA 21. Thus, the amount of income received or the value of take-home pay can be higher. The additional income is expected to improve purchasing power so that business activities can roll and the economy can grow.

Meanwhile, Wahyu Nuryanto, Executive Director of MUC Tax Research Institute, believes that the ITA 21 borne by the government may not be sufficient to boost the purchasing power of the entire population. This is because only formal sector taxpayers would benefit, while many people work in the informal sector. (ASP/KEN)