GOV. REG. IN LIEU OF LAW CONCERNING JOB CREATION

The Impact of Gov. Reg. in Lieu of Law 2/2022 on Tax Provisions

Muhamad Wildan | Senin, 02 Januari 2023 | 14:51 WIB
The Impact of Gov. Reg. in Lieu of Law 2/2022 on Tax Provisions

Coordinating Minister for Economic Affairs, Airlangga Hartarto (middle), with Coordinating Minister for Politics, Law, and Human Rights Affairs,Mahfud MD (left), accompanied by Deputy Minister of Law and Human Rights,Edward Omar Sharif Hiariej, delivering a press conference at the Presidential Office, Jakarta Presidential Palace, Friday (Dec 30th, 2022). ANTARA FOTO/Sigid Kurniawan/YU

JAKARTA, DDTCNews – The enactment of Government Regulation in Lieu of Law (Gov. Reg. in Lieu of Law) 2/2022 concerning Job Creation has impacted tax provisions.

Referring to Article 111, Article 112 and Article 113 of the Job Creation Gov. Reg. in Lieu of Law, which revise the Income Tax Law, the VAT Law and the General Provisions and Tax Procedures Law respectively, the articles that have been revised through Law 7/2021 concerning the Harmonisation of Tax Regulations are no longer revised through the Job Creation Gov. Reg. in Lieu of Law.

“[Gov. Reg. in Lieu of Law 2/2022 has been] synchronised and harmonised with Law 7/2021 concerning the Harmonisation of Tax Regulations and Law 1/2022 concerning the Financial Relations between the Central Government and Local Governments,” remarked the Coordinating Minister for Economic Affairs Airlangga Hartarto, Friday (30/12/2022).

For example, the Job Creation Gov. Reg. in Lieu of Law does not revise Article 4 of the Income Tax Law like Law 11/2020 concerning Job Creation. At that time, Article 4 of the Income Tax Law was revised through the Job Creation Law to regulate income in the form of dividends excluded from Income Tax objects.

Considering that Article 4 of the Income Tax Law is also outlined in the Harmonisation of Tax Regulations Law and contains provisions on the exclusion of dividends from taxable objects, revisions to Article 4 of the Income Tax Law no longer need to be included in the Job Creation Gov. Reg. in Lieu of Law.

Not only the provisions on central taxes, but the Job Creation Gov. Reg. in Lieu of Law also impacts the provisions on local taxes and local charges. Under the Job Creation Law, Article 114 is an article that revises Law 28/2009 concerning Local Taxes and Local Charges.

Article 114 of the Job Creation Gov. Reg. in Lieu of Law only stipulates that the provisions on local taxes are pursuant to the provisions under the Financial Relations between the Central Government and Local Governments Law. “Provisions on local taxes and local charges in the context of job creation are pursuant to the provisions stipulated under the Law concerning Financial Relations between the Central Government and Local Governments,” reads Article 114 of the Job Creation Gov. Reg. in Lieu of Law.

Revisions to the Local Taxes and Local Charges Law in the Job Creation Law, such as the building construction permit charges, the nullification of the distribution permit charges and the central government’s authority to evaluate provisions on local taxes have been regulated under the Financial Relations between the Central Government and Local Governments Law, thereby, do not need to be re-regulated in the Job Creation Gov. Reg. in Lieu of Law.

On another note, the Job Creation Gov. Reg. in Lieu of Law has been enacted by the government to implement the Constitutional Court Decision Number 91/PUU-XVIII/2020. The decision declares Law 11/2020 concerning Job Creation unconstitutional and needs to be revised immediately within 2 years after the decision is read.

According to the government, the Job Creation Gov. Reg. in Lieu of Law needs to be issued because of  compelling urgency. The government views that the world is currently faced with an energy and food crisis, climate change and supply chain disruptions.

This problem can be addressed through policies based on the Job Creation Gov. Reg. in Lieu of Law. “The said conditions ... have fulfiled the parameters as compelling urgency which authorises the President to issue a Gov. Reg. in Lieu of Law,” the government wrote in the considering section. (sap)

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