The government has submitted the Tax Omnibus Law Draft Bill to the House of Representatives (DPR) for discussion and ratification. Public attention is not too strong compared to the Employment Creation Omnibus Bill. Whereas the Tax Omnibus Law will have a direct impact on the welfare of the people. Until this policy summary is drawn up, the discussion on the tax omnibus law in the DPR is still unclear whether to continue or cancel it.
The government argues that tax relaxation through the Tax Omnibus Law is needed to attract foreign investment to invest in Indonesia. According to various literatures, the biggest obstacle to investment in Indonesia is not tax relaxation, but legal uncertainty, inefficient bureaucracy and corruption. Based on data from the World Bank, which routinely measures the level of ease of doing business in countries around the world, Indonesia's index in 2020 is ranked 73 out of 190 countries. Indonesia's ranking has not changed compared to the previous year. Indonesia's ranking is still far below other countries in Southeast Asia such as Singapore (2), Malaysia (12), Thailand (21), Brunei Darussalam (66), and Vietnam (70).
This policy brief tries to examine critically on three main issues, namely (1) the reduction of Corporate Income Tax (PPh), (2) the abolition of dividend tax, and (3) the placement of tax incentives in one legal framework.