Jokowi challenger moots tax cuts to stimulate economy

If elected as president, Prabowo Subianto will introduce a progressive individual tax rate, with the rich paying more to ensure a more equitable society.
If elected as president, Prabowo Subianto will introduce a progressive individual tax rate, with the rich paying more to ensure a more equitable society.PHOTO: FACEBOOK/PRABOWO SUBIANTO

JAKARTA • Indonesian presidential candidate Prabowo Subianto is proposing deep tax cuts to stimulate South-east Asia's largest economy, copying the playbook successfully used by US President Donald Trump.

Mr Prabowo and his running mate, Mr Sandiaga Uno, will lower company and individual taxes by between 5 and 8 percentage points over five years and widen the tax-to-gross domestic product ratio to at least 16 per cent from about 11 per cent, according to Mr Anthony Budiawan, an economist advising the pair's campaign.

Lower taxes will lead to greater compliance and allow the government to cut borrowings to fund its budget, he said.

The economy has taken centre stage in Indonesia's presidential election campaign, with Mr Prabowo targeting incumbent Joko Widodo's policy of adding to record government debt to finance building roads, ports and dams worth billions.

The swelling of government debt and its high foreign ownership were factors in a market sell-off last year, which saw the rupiah tumble to levels not seen since the 1997-98 Asian financial crisis.

Indonesia now has a top personal income tax rate of 30 per cent and a corporate tax rate of 25 per cent.

Mr Prabowo is taking on Mr Joko in a rematch of the 2014 election, which he narrowly lost.

 
 

The former general has picked Mr Sandiaga, a former private equity investor, and has blamed the high public debt and slump in the currency as examples of Mr Joko's mismanagement of the economy.

Mr Joko, who came into office promising to deliver annual growth of 7 per cent, is set to miss the target by a wide margin as the economy has expanded at about 5 per cent during his tenure. But he enjoys a lead of 20 percentage points in opinion polls over Mr Prabowo, after creating millions of new jobs and spending billions to add roads, ports and airports to cut logistic costs in the archipelago.

BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on January 14, 2019, with the headline 'Jokowi challenger moots tax cuts to stimulate economy'. Print Edition | Subscribe