Indonesia to crack down on loss-making companies

The Indonesian government has indicated that it plans to bring in 'tax minimums' for companies that continue to operate in the country despite reporting losses year after year.

Natalia Treukhova

The Southeast Asian giant is reportedly looking to tweak its corporate taxation laws so that companies can no longer avoid paying tax in Indonesia by regularly reporting losses. ‘Most of them operate normally without signs of bankruptcy… it’s an insult to the tax authority,’ said Indonesian Finance Minister Bambang Brodjonegoro on Friday.

In particular, the ‘alternative minimum tax’ would target multinational companies that practice profit shifting to report ‘losses’ in Indonesia and avoid tax. Currently, Indonesia’s tax rate sits at 25 per cent, or 20 per cent for publicly listed companies. Indonesia suffered a significant tax shortfall this year following a slump in exports, deflated corporate earnings and slower economic growth.

The AMT would take the form of a revision to Indonesia’s Income Tax Law, which will be discussed later this year after the government’s tax amnesty bill is passed. It is not yet clear how high or low the minimum tax rate would be set. Source: Reuters

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