FACTBOX-Details of Indonesia's new tax law

SECOND TAX AMNESTY PROGRAMME

Another controversial provision in the legislation is the so-called "Taxpayers' Voluntary Disclosure Programme", which will run from Jan. 1 to June 30, 2022, as an extension of the tax amnesty Indonesia ran in 2016 to 2017.

The new programme will allow previous amnesty participants to disclose unreported assets acquired before 2016. Authorities will regard the assets as additional income and charge a tax rate of between 6% to 11% of the asset value.

Taxpayers reporting hidden assets between 2016 to 2020 could also come clean and pay between 12% to 18% tax.

The lower rates apply to assets that are reinvested in resource processing or renewable energy projects or into government bonds. Overseas assets brought back to the country will also enjoy a lower rate.

Some analysts have warned that the new amnesty programme could cause moral hazard for taxpayers, who might prefer not to pay future taxes and wait for another amnesty.

CARBON TAX

The law introduces a new carbon tax that will be subjected to individuals and companies buying goods containing carbon or conducting activities that emit carbon.

The government originally proposed a rate of 75 rupiah per kilogram (kg) of CO2 equivalent (CO2e). This was dropped during the deliberation process and the law now says the carbon tax rate will be determined by carbon market prices, with a floor rate of 30 rupiah per kg of CO2e.

Starting April 2022, companies that operate coal fired power plants will have to pay the carbon tax at the floor rate.

Under the new law, the government is also mandated to come up with a roadmap to set up carbon trading by 2025 and a clear strategy to reduce Indonesia's green house gas emission.

The proceeds of this new tax will be used in climate change mitigation projects.

OTHER CHANGES

The law also changes administration procedures such as the objection and appeal processes in the tax court and allowing taxpayers under investigation to settle their case by paying their dues, among other measures.

Under the law, the national citizen identification number will be synched with tax identification to better identify those liable to pay taxes and help authorities expand the tax base in a country where many don't pay taxes. ($1 = 14,250.0000 rupiah)