Center of Reform on Economics: Raising Minimum Wage Will 'Burden' Businesses

- 13 January 2022 17:25 WIB
The two things play significant roles in Indonesia's economy this year. (Unsplash/Kelly Sikkema)
The two things play significant roles in Indonesia's economy this year. (Unsplash/Kelly Sikkema)

JAKARTADAILY.ID – The Center of Reform on Economics, or Core Indonesia, believes that raising the minimum wage in DKI Jakarta and canceling the reduction in the corporate income tax rate (PPh Badan), will impose an additional burden on businesses.

Additionally, they said that The government must maintain a balanced incentive structure to ensure that the additional burden does not impede economic recovery.

The DKI Jakarta Provincial Government raised the provincial minimum wage (UMP) increase from 0.85 percent to 5.1 percent, meaning Jakarta's UMP is set to rise by Rp225.667 this year, to Rp4.64 million.

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Furthermore, the government will decide this year whether to keep the corporate income tax rate at 22 percent. Previously, they intended to reduce it to 20 percent in 2022, but the plan was scrapped and the rate barely changed.

Yusuf Rendy Manilet, Indonesia's Core Economist, believes that these factors could intensify the burden on the business world in the midst of the ongoing Covid-19 pandemic. The good economic outlook for next year, on the other hand, makes the increase in the burden fairly reasonable.

“The economy is expected to grow significantly faster in 2022 than it did this year. Higher economic growth should have a recovery effect, but because the recovery effect will differ between sectors in 2022, the impact of increasing PPh and UMP burdens will differ as well,” he said in a statement to Bisnis.com.

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Nonetheless, Yusuf claims that the recovery will not be equal across all business sectors. Several industries, including accommodation, food and beverage services, and transportation, will continue to struggle in 2022. As a result, the additional burden, according to Yusuf, makes these sectors risky.

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Editor: Suksmajati Kumara

Source: ekonomi.bisnis.com

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