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State budget deficit increases following government's decision to provide stimulus

13 March 2020 12:38

JAKARTA. The government released its second economic stimulus, which mainly focused on fiscal incentives, as an attempt to reduce the impact of the spread of the coronavirus.

The fiscal stimulus includes (1) Relaxation of Article 21 income tax (PPh 21)  through the Government-Borne (DTP) scheme to all manufacturing industry sectors. It is implemented for six months, for employees with an annual salary below Rp 200 million. (2) Relaxation of Article 22 import income tax for 19 sectors in the processing industry and Ease of Imports for Export Purposes (KITE). The policy will be valid for six months. (3) Relaxation of Article 25 income tax in the form of a 30% cut in corporate tax reduction for the processing industry. The policy will be valid for six months.. (4) Relaxation of Value Added Tax (VAT) restitution in the form of audit-free and ceilingless for 19 industries for six months.

Due to the stimulus, the government estimates that the 2020 budget deficit could increase to around 2.5% of Gross Domestic Product (GDP). Previously, the estimated deficit was 1.76% of GDP.

"That will be about Rp 125 trillion (additional deficit). Spending is not stopped but revenues are falling. We will see that the State Budget has a supportive impact on the economy of almost 0.8% of GDP," Sri Mulyani Indrawati, Minister of Finance, told a press conference at the Ofice of Coordinating Ministry for Economic Affairs, Jakarta, Friday (13/3).

Even Sri Mulyani revealed that the government could provide more stimulus, due to the uncertainty caused by the coronavirus outbreak. (AM/AR)

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