Discussing the Law on the Harmonization of Tax Regulations

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On Monday, November 28, 2022, the Leadership Club held a webinar themed “The Law on Harmonization of VAT Cluster Tax Regulations”. The webinar was opened with remarks by the FBE Ubaya Dean, Dr. Putu Anom Mahadwartha, S.E., M.M., CSA, and followed by a presentation from Afid Nurcahya, S.S.T., M.A. In summary, the Taxation Law was ratified a year ago on October 7, 2021, which then, on October 29, 2021, was stipulated to be Law No.7 of 2021 concerning Harmonization of Tax Regulations. This new law does not replace the previous law but change some parts. This is due to three factors: taxation efficiency in Indonesia is only 63.58%. Then, to expand the taxation base, previously, non-BKP and non-JKP could become BKP and JKP, for example, mining goods. The next factor is the high tax expenditure due to the many facilities borne by the government. Things regulated in the HPP Law are objects and facilities (changing several provisions in Article 4A and Article 16B of the VAT Law), increasing VAT rates (changing provisions in Article 7 of the VAT Law), convenience and simplicity (changing provisions in Article 8A and inserting new articles namely Article 9A), input tax credit (renewing and deleting several provisions in Article 9), as well as the delegation of authority (adding a new article: 16G about nine matters submitted to the Minister of Finance regarding its implementation). Afid then elaborated on the above points in a detailed explanation.

Reduction of VAT Objects and Facilities. VAT exemption facilities are provided for staple goods, health services, educational services, social services, and several other types of services. These facilities intend to broaden the VAT base while still taking into account the principles of justice and benefit, especially promoting public welfare and national interest (optimizing state revenue).

VAT rate increase. This is motivated by Indonesia’s low VAT rate compared to global rates (15.4%), OECD countries (19%), and BRICS countries (17%). The VAT rate will increase gradually from 10%. In addition, tax administration provides other conveniences and simplicity by using a certain amount for PKP whose business circulation does not exceed a certain amount and carry out certain business activities.

Input tax credit. In the case of crediting the amount of input tax, if it is known with certainty through the books, then the amount of input tax credited is the input tax relating to the delivery of which the tax is payable. Conversely, if it is not known with certainty, the amount of input tax credited is calculated using the input tax credit guidelines. Input tax is only applied to expenses for obtaining BKP/JKP that directly relate to business activities.

Delegation of authority. Initially, it was regulated per article (related to other values, criteria for not submitting BKP/JKP, calculation and procedure for returning excess input tax, low-risk PKP given preliminary returns, guidelines for PMK crediting, determination of certain business sectors in the morning PKP has not submitted BKP/JKP, repayment of input tax, crediting of input tax, total circulation of certain businesses, certain types of business activities, certain types of BKP/JKP, and the amount of VAT collected/paid), and has been combined into 1 in Article 16G. This is the summary of the webinar that strives to the tax slogan “Sage People Obey Taxes” and taxes are needed to develop the State and function as equity.

Figure 1. Afid Nurcahya accompanied by Jacobus Benitto as moderator
Figure 1. Webinar Participants

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