KONTAN.CO.ID - ​JAKARTA. Indonesia's finance minister on Monday laid out a government proposal for an overhaul of tax regulations, including introducing a programme to report undisclosed assets, bringing in a carbon tax and hiking the VAT rate.

Sri Mulyani Indrawati told a meeting with parliament's finance commission the measures were aimed at boosting government revenues that have dropped in Southeast Asia's biggest economy due to the coronavirus pandemic.

"Even though we are discussing this during the COVID pandemic, it does not divert our attention from the medium-, long-term need to build a fair, healthy, effective and accountable tax system," Sri Mulyani said, promising implementation will take into account economic recovery.

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The minister proposed increasing the base value added tax (VAT) rate to 12%, from 10% currently, applying a 5%-25% rate range for some goods and services, and removing most exemptions. To limit the impact on the poor, she proposed more subsidies.

An income tax rate of 35% was floated for people earning at least 5 billion rupiah ($345,662) annually. Indonesia now applies 5% to 30% personal income tax.

She also proposed a new carbon tax of 75 rupiah ($0.0052) per kg of CO2 equivalent and an excise tax for all plastic products.

The government needs to reform the tax policy now so it is ready to be implemented once Indonesia passes through the pandemic, said Moekti Prasetiani Soejachmoen, chief economist at investment firm Danareksa.

Editor: Yudho Winarto