The 2008 Corporate Income Tax Reform and Its Contribution to Poverty Reduction in Indonesia

Teguh Dartanto

No 201203, Working Papers in Economics and Business from Faculty of Economics and Business, University of Indonesia

Abstract: The CIT reform enacted by Law No.36 of 2008 cuts maximum tax rates from 30 per cent to 25 per cent and offers some incentives for business in Indonesia. This study aims at measuring the impacts of 2008 CIT reform on tax revenue and poverty. The 2008 CIT reform supported with the administrative reforms and the 2008 tax amnesty policy has increased new corporate tax payers by 422,407 and tax revenue by 53.95 per cent during 2009 to 2011. Further, the simulation result of CGE-Microsimulation shows that cutting the CIT rate from 30 per cent to 25 per cent will attract IDR 41.77 trillion of new investments, create 441,910 new job opportunities, boost 1.46 per cent of economic growth, decline 1 per cent of consumer price index, and raise averagely 1.5 per cent of wage rates. These macroeconomic changes contribute significantly to lift 1.88 million people (0.898 per cent) out of poverty.

Keywords: Corporate Income Tax Reform; CGE; Microsimulation; Poverty; Indonesia (search for similar items in EconPapers)
JEL-codes: C68 H25 I32 I38 (search for similar items in EconPapers)
Pages: 23 pages
Date: 2012-04, Revised 2012-04
New Economics Papers: this item is included in nep-acc, nep-pub and nep-sea
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