The Directorate General of Taxes (DGT) held a
public consultation to finalize the formulation of simplification of deductions
and the application of effective rates for Income Tax (PPh) Article 21 which is
currently still in the form of a Draft Government Regulation (RPP).
This plan is an integral part of the Core Tax
Administration agenda based on Government Regulation Number 40 of 2018
concerning Renewal of the Tax Administration System. The Managing Partner of
the BATS-Consulting tax consultant, Brian Pramudita, stated that with this
simplification the calculation of Article 21 PPh becomes more instantaneous so
that it can encourage independence and compliance with the calculation and
deposit of Article 21 PPh. This is also intended by the tax authority to
provide convenience in building a system capable of validating taxpayer tax
calculations.
Complexity of Calculation of PPh
Article 21
The background of the tax authoritys initiation to
simplify the withholding tax for individual taxpayers is the complexity of
scenarios for calculating PPh Article 21. The DGT stated that up to now,
scenarios for calculating PPh Article 21 can reach around 400 different
scenarios. This is of course a separate homework for the deduction party or
income provider to apply an appropriate deduction scheme for the income
received by the recipient of income.
Differences in tax subjects or income recipients
can significantly provide different scenarios for calculating PPh Article 21
for taxpayers. Broadly speaking, tax subjects who differ in their treatment of
the calculation of Article 21 withholding Income Tax are divided into seven
parties, including permanent employees, temporary employees, non-employees,
certain non-employees, activity participants, pensioners/severance recipients,
and periodic pension recipients. Each taxpayer has a different tax treatment.
In addition, differences in the calculation of
Article 21 PPh deductions also refer to other factors such as differences in
bases and rates, status or position of the income recipient, when starting
work, type of income, source of funds, period of receipt of income, to the
factor of ownership of the NPWP by the income recipient. The variety of factors
that can affect the value of withholding PPh Article 21 shows how complex the
scheme for calculating and deducting PPh Article 21 has been implemented so
far.
PPh Article 21 Simplification
Projection Design
As a response to this complexity, the
simplification of the PPh Article 21 administrative system was taken as one of
the tax reform steps that the government is currently preparing. In his review
of his presentation, DGT stated that this simplification at least included the
implementation of the coretax system, simplification of Article 21 PPh
calculations and simplification of Article 21 PPh deduction arrangements.
The simplification of the regulation of withholding
Income Tax Article 21 will be realized by issuing a legal umbrella equivalent
to a Government Regulation (PP) which is specifically designed for a simpler
calculation scheme for Article 21 Income Tax. The PP that will be launched soon
will be the legal basis for the application of the tax rate as referred to in
Article 21 paragraph (5) of the Income Tax Law with a new, simpler scheme.
Furthermore, the PP will be accompanied by the signing of derivative rules at
the level of the Regulation of the Minister of Finance (PMK) and the
Regulation/Decree of the Director General of Taxes (PER/KEP of the Director
General).
PMK which is a derivative regulation of the PP
simplification of the regulation of withholding PPh Article 21 is planned to
combine four PMKs. PMK 262/PMK.03/2010 concerning Procedures for Withholding
Income Tax Article 21 for PNS/TNI/Police/State Officials, PMK 252/PMK.03/2008
concerning Procedures for Withholding Income Tax Article 21 General, PMK
250/PMK.03/2008 concerning Position Fees and Pension Fees, and PMK
102/PMK.03/2016 concerning Determination of the Daily and Weekly Employee
Income Section and Other Non-Permanent Employees Not Subject to Income Tax
Withholding, will be combined into one unified rule. Meanwhile, technical
guidelines related to procedures for withholding, depositing, and reporting as
well as other administration related to Article 21 Income Tax will be stated in
the PER/KEP of the Director General.
Concerning the Effective Tariff of
Article 21 Income Tax
Based on the results of a comparative study
conducted by the government, there are several countries such as Malaysia,
Australia, and the United States where the calculation of personal income tax
deductions is based on the effective rate. From the results of the comparison,
the calculation of Article 21 Income Tax will be simplified by providing
simplicity and ease of implementation of the fulfillment of tax obligations to
taxpayers by applying an effective rate of withholding Income Tax Article 21.
Going forward, the effective rate of Article 21
Income Tax for income received by permanent/retired employees and civil
servants/TNI/Polri/State Officials is listed in three tables of monthly rates
based on the amount of PTKP. The table consists of around 40 layers of
effective tax rates that are used as a reference for calculating Article 21
Income Tax.
Furthermore, income received by non-employees will
be subject to the effective rate of Article 21 Income Tax which only consists
of 1 tariff table. The table related to the effective non-employee income tax
rate contains 35 layers of rates based on gross income.
For non-permanent employees, their income is
designed to be subject to a daily effective tax rate based on the amount of
gross income with a certain threshold. Then, for other tax subjects including
activity participants, employees who withdraw pension funds, and former
employees who receive bonuses, they are subject to Article 21 Income Tax at the
rate of Article 17 of gross income. Meanwhile, the supervisory board or
commissioner who is not a permanent employee is subject to Article 21 Income
Tax at the monthly effective rate of gross income. Hoped, the
implementation of this rule will make it easier for taxpayers to calculate the
withholding of Income Tax Article 21 both at each tax period and at the end of
the year tax calculation.