Sunday, August 3, 2008

Dividend Tax Rate Set at 10% to Up Stock Market Investment

Dividend tax will be set at 10 percent at the highest, half of the current rate of 20 percent, the latest deliberation on the income tax bill reveals.

"The dividend tax rate will be 10 percent at its maximum," Finance Ministry Director General of Taxation Darmin Nasution said Thursday after meeting with the working committee overseeing the bill.

Darmin said the government would have the right to determine the exact rate through a government regulation, which would be designed later.

The deliberation is expected to be completed in August, when the House will end its sitting period.

The dividend tax will be imposed on both publicly listed and privately held companies.

On Wednesday, the government and the committee were split over the extent of the cut. The two largest factions -- the Indonesian Democratic Party of Struggle (PDI-P) and the Golkar Party -- wanted the rate cut to 5 percent, while the remaining eight factions and the government wanted the tax set at 10 percent.

The factions also said privately held companies ought to pay out dividends at least once in three years, or be forced to pay out a higher dividend tax.

The chairman of the working committee overseeing the income tax bill, Melchias Markus Mekeng, said the committee had agreed to cancel the three-year pay-out law.

"We made a simulation on the decision and found out it violated a law on limited companies," Melchias said.

He expects a maximum 10 percent dividend tax to boost investment in the stock market.

"People are expected to invest long term because the dividend tax is small," he said.

Source: The Jakarta Post, Fri, 07/04/2008 11:08 AM

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