Indonesia’s 2020 state revenue forecast to decline 10 percent due to COVID-19

Illustrative image (Photo: Jakarta Post)

Jakarta (VNA) – Indonesia’s state revenue is expected to decline significantly this year as the government rolls out tax incentives, including corporate income tax cuts, amid the COVID-19 pandemic that has triggered declines in commodity prices and business output.

Finance Minister Sri Mulyani Indrawati said on April 6 that the state revenue would amount to 1.76 quadrillion IDR (65 billion USD) this year, a year-on-year decline of 10 percent compared to last year. The figure is also lower than the 2020 state budget target of 2.23 quadrillion IDR.

Tax income will fall 5.4 percent year-on-year, while non-tax income will contract 26.5 percent due to lower oil and coal prices.

Indonesian President Joko Widodo has signed a government regulation that activates crisis protocols, such as widening the state budget deficit beyond the legal limit of 3 percent of GDP, as part of efforts to cushion the economy in the face of a global recession caused by the pandemic.

The regulation slashes corporate income tax from 25 percent to 22 percent for the years 2020 and 2021 and will be further reduced to 20 percent starting 2022. The government will provide additional rate cuts of 3 percent for public companies with at least 40 percent of their stock traded on the stock market.

It also exempts workers whose annual salary is below 200 million IDR from paying income tax for six months, as well as deferring import tax payments for six months for 19 manufacturing industries. It will also speed up the repayment of overpaid taxes.

Indonesia has declared a public health emergency and ordered large-scale social distancing as the virus spreads rapidly.

The government now expects the country’s economy to grow 2.3 percent this year, the lowest since 1999, and even contract 0.4 percent in the worst-case scenario as the virus disrupts business activity./.