Indonesia Exempts Low-Income Earners from Taxes in 2024

The Indonesian government has announced plans to exempt low-income earners registered in the Integrated Social Welfare Data (DTKS) from paying taxes starting in 2024. This move is part of the government's efforts to increase the country's tax ratio to 23% of GDP, a key campaign promise of President Prabowo Subianto.

Currently, Indonesia's tax revenue is lower compared to neighboring countries such as Vietnam and the Philippines. To address this issue, the government is considering making the Indonesian Revenue Authority independent from the Finance Ministry, with the aim of improving tax compliance and enforcement.

Why this matters: Improving tax education and enforcement are seen as vital to increasing voluntary taxpayer compliance, which is essential for the government to provide adequate public services to its citizens.

The tax exemption for low-income earners is expected to provide relief to those struggling financially, while also encouraging more individuals to register with the DTKS. By expanding the tax base and improving compliance, the government hopes to generate the necessary revenue to fund various development projects and social welfare programs.

President Prabowo Subianto has emphasized the importance of achieving the 23% tax ratio target, stating, "Improving our tax revenue is essential for the country's growth and development. By exempting low-income earners and strengthening our tax enforcement, we aim to create a more equitable and sustainable tax system."

The Indonesian government's decision to exempt low-income earners from taxes in 2024 is a significant step towards achieving its goal of increasing the country's tax ratio. With a focus on improving tax education and enforcement, the government aims to boost voluntary taxpayer compliance and generate the necessary revenue to provide essential public services to its citizens.

Key Takeaways

• Indonesia to exempt low-income earners from taxes starting 2024.
• Aims to increase tax ratio to 23% of GDP, a key campaign promise.
• Considering making tax authority independent to improve compliance.
• Tax exemption to provide relief, expand tax base, and generate revenue.
• Improving tax education and enforcement are vital for sustainable growth.