TAX RELIEF DURING THE PANDEMIC

By:   Adv. Ida Bagus Made Utama, S.E.,S.H.,M.H, BKP.,CPCLE

The COVID-19 pandemic is a national disaster that has affected economic stability and community productivity, impacting workers and business actors. Therefore, regulatory efforts are necessary to mitigate its impact. Tax relief measures have been introduced to support businesses and individuals. Due to the widespread effects of the COVID-19 pandemic on various sectors, such as small and medium enterprises, President Joko Widodo (Jokowi) has developed four additional support schemes for MSMEs. For instance, some measures include distributing food parcels, providing direct cash assistance (through a Basic Needs Allowance), implementing a village-level Basic Needs Allowance, granting exemptions or reductions on electricity tariffs, and issuing pre-employment cards to MSME entrepreneurs who belong to low-income or vulnerable groups impacted by the Covid-19 pandemic. There are also measures to ease and restructure MSME credit, which include delaying instalments and subsidizing the interest for KUR, UMi and other beneficiaries. Additionally, the taxation sector has been relieved through the issuance of Minister of Finance Regulation number: 44/PMK.03/2020 dated 27 April 2020.

The Ministerial Regulation stipulates that the government will cover MSME Income Tax for a period of 6 months, running from April until September 2020. Eligible businesses are those whose turnover is below 4.8 billion, and they will get benefit from an incentive scheme provided through government-funded income tax. Initially, the government aimed to lowering the tax rate into 0%. However, after multiple consideration, they have decided to maintain the income tax rate for MSMEs at 0.5%. The decision was made with the realization that reinstating the tax rate above 0% post the Covid-19 pandemic, it would pose challenges the rate was returned above 0%. The government has ultimately determined to bear MSME income tax. Through the Income Tax DTP scheme, MSMEs to bear from paying income tax for six months.

The government’s MSME income tax policy is deemed suitable to assist MSME players in weathering the Coronavirus pandemic. The government’s aspiration is for MSME players to maintain production and avoid staff redundancies. It is hoped that the MSME tax relief policy can assist business entities who continue to strive to maintain their business continuity. This policy is particularly relevant to the tourism sector, which encountered an almost 0% occupancy rate in April, resulting in temporary closures of tourism-related businesses for an undetermined duration. Unfortunately, this presents a significant dilemma for business actors. Nevertheless, they are striving to retain employees despite offering them a modest compensation.

The author is a Registered Tax Consultant and Lawyer/Advocate at IBU Consulting Denpasar and also an academic lecturer at one of the Universities in Bali.