Indonesia’s tax authorities are planning to revise the non-taxable income regulation again in an attempt to improve the nation’s low tax ratio. Last year the government of Indonesia raised non-taxable income by 50% from Rp36 million to Rp54 million per year, in a bid to strengthen people’s purchasing power and encourage household consumption. However, considering local minimum wages vary across the country’s 34 provinces, the nation-wide non-taxable income level of Rp54 million causes some problems. Indonesia’s tax ratio remains very low, currently only 10.3% of gross domestic product (GDP), trailing far behind regional peers such as Thailand, Malaysia and the Philippines. Tax revenue accounts for around 85% of total government revenue and it therefore forms the backbone of government spending.
