- The document discusses Indonesia's economic and fiscal updates under President Joko Widodo's 2019-2024 vision of improving connectivity and infrastructure. Key points include GDP growth slowing to a 2-year low of 5.05% in Q2 2019 due to weaker investment. Exports fell while imports declined faster, helping GDP. The US-China trade war has boosted Vietnam's economy but widened Indonesia's trade deficit. Solutions proposed include improving competitiveness, workforce skills, and commodity value-addition. The DGT outlines new tax regulations like tax holidays and super deductions to promote investment and employment.

1. TAX FLASH
“This is not about me, or
you. It’s time to think
about building a nation
together.”
- Joko Widodo
In This Issue
• Indonesian Vision
(2019-2024)
• Economic & Fiscal
Update
• The US – China
Trade War — KIB
Trade Talk
• Directorate General
of Taxes (DGT)
Tax Holiday | Super
Deduction
• Our Involvement
Indonesia Vision 2019—2024
“Our focus is to improve connectivity”
Said President elect Mr. Joko Widodo during the “Indonesian Vi-
sion” rally on July 14,2019, outlining his vision for the 2019—
2024 term. President Widodo will accelerate development and connect the
infrastructure projects that would open marketing and distribution access to
small and medium enterprises (SMEs), plantations and fisheries to boost
regional economies. Infrastructure shall remain the priority amongst other 5
visions he pledged : Human Capital development, broader investment op-
portunity, bureaucracy reformation, and a more efficient state budget.
KIB E-newsletter Aug 2019

2. Economic & Fiscal Update
Indonesia GDP Annual Growth Weakens to 2-Year Low
Key Points:
1.Indonesia’s annual economic growth eased slightly to 5.05% in the
second quarter of 2019 from 5.07% in the previous quarter. As invest-
ment growth remained the slowest since early 2017.
2. GDP Annual Growth Rate averaged 5.28% from 2000 until 2019.
“The social justice movement of the 21st century is economic development. ”
-Wendell Pierce
On the expenditure side, fixed-investment went up 5.01 percent in the second quarter, slowing
from 5.03 percent in the March quarter. Meanwhile, household consumption rose 5.17 percent,
after a 5.02 percent increase in the previous period; and government spending climbed 8.23 per-
cent, compared with a 5.21 percent advance in the previous period.
Net external demand contributed positively to the GDP growth as exports fell 1.81 percent (vs -
1.86 percent in Q1) and imports tumbled at a faster 6.73 percent (vs -7.36 percent in Q1).
On the production side, output growth slowed for: manu-
facturing (3.54 percent vs 3.86 percent); electricity and
gas (2.20 percent vs 4.12 percent); accommodation &
food services (5.52 percent vs 5.87 percent); construction
(5.69 percent vs 5.91 percent); wholesale and retail trade
(4.63 percent vs 5.27 percent); business services (9.94
percent vs 10.36 percent); financial and insurance ser-
vices (4.55 percent vs 7.32 percent); and water and waste
management (8.35 percent vs 8.95 percent). In addition,
mining and quarrying output shrank 0.71 percent, com-
pared to 2.32 percent expansion in the previous period.
Meantime, GDP expanded faster for: agriculture (5.33 percent vs 1.82 percent); transportation &
storage (5.78 percent vs 5.25 percent); public administration, defense and social security (8.82
percent vs 6.40 percent); real estate (5.74 percent vs 5.46 percent); information and communica-
tion (9.60 percent vs 9.06 percent); education (6.29 percent vs 5.60 percent); health and social
services (9.09 percent vs 8.59 percent); and other services (10.73 percent vs 9.99 percent)
2019 Growth
Target: 5.2%

3. Economic & Fiscal Update
“Nothing is impossible if we put our trust in God”
-Bambang Suwarso
Source: Statistic Indonesia | Chusnul Ch Manan TradingEconomics
GDP Growth Actual (%) Previous (%)
GDP Growth Rate YoY Q4 5.18 5.17
Full Year GDP Growth
2018
5.17 5.07
GDP Growth rate YoY Q1 5.07 5.18
GDP Growth rate YoY Q2 5.05 5.07
GDP Growth Rate YoY Q3 5.05
Key economic indicators 2018 2019 2020
1. Main economic indicators
Gross Domestic Product
(GDP)
5.2 5.1 5.2
Private consumption 5.1 5.2 5.2
Government consumption 4.8 5.1 5.0
Gross fixed capital formation 6.7 5.0 5.2
Exports of goods and services 6.5 2.6 3.5
Imports of goods and services 12.0 0.0 3.2
2. Other economic indicators
Consumer prices index 3.2 3.0 3.1
3. Economic Assumptions
Exchange rate (IDR/USD) 14,237 14,186 14,475
Indonesian crude price (USD/
bbl)
67.5 64.3 63.3
Given the weaker than expected outturn in Q1
and renewed trade tensions, economic growth
in 2019 is forecast to ease to 5.1% and then
tick up to 5.2% in 2020. The modest accelera-
tion in private consumption is expected to
continue due to the general elections, low in-
flation, and buoyant labor market conditions.

4. Economic & Fiscal Update
“Nothing is impossible if we put our trust in God”
-Bambang Suwarso
Source: Statisctic Office of Vietnam | TradingEconomics
GDP Growth Actual (%) Previous (%)
GDP Growth Rate YoY Q3 6.88 6.73
GDP Growth Rate YoY Q4 7.31 6.82
GDP Growth Rate YoY Q1 6.79 7.31
GDP Growth Rate YoY Q2 6.71 6.82
GDP Growth Rate YoY Q3 6.71
In Vietnam, Industry and construction constitute the biggest sector of the economy (41 % of total GDP). Yet, in the
past six years the growth in services outpaced significantly all other sectors, and today services account for 37 % of
GDP. Finally, agriculture, forestry and fishing represent 22 % of total output.

5. Economic & Fiscal Update
“I’m not in competition with anybody but myself. My goal is to beat my last performance”
-Celine Dion
Source: TradingEconomics
The most recent 2018 edition of Global Competitiveness Report assesses 140 economies. The report is made up of 98 variables, from
a combination of data from international organizations as well as from the World Economic Forum’s Executive Opinion Survey. The
variables are organized into twelve pillars with the most important including: institutions; infrastructure; ICT adoption; macroeconomic
stability; health; skills; product market; labour market; financial system; market size; business dynamism; and innovation capability. The
GCI varies between 1 and 100, higher average score means higher degree of competitiveness. With the 2018 edition, the World Eco-
nomic Forum introduced a new methodology, aiming to integrate the notion of the 4th Industrial Revolution into the definition of com-
petitiveness. It emphasizes the role of human capital, innovation, resilience and agility, as not only drivers but also defining features of
economic success in the 4th Industrial Revolution.
64.94 58.05
2019
Competitiveness Index

6. Economic & Fiscal Update
“Regardless of the industry, antitrust law is meant to benefit consumers not competitors
- Marvin Ammori
Investment growth continued to cool down to 5.0% yoy from 6.0 % in Q4 2018, in part because of postponed investment deci-
sions ahead of the elections; weaker public infrastructure spending, in part due to current account concerns, and gradual deterio-
ration in commodity prices. A high base effect also contributed to the weaker outturn. Investment in buildings and structures re-
mained the main contributor to overall investment growth at 4.1 pp up from 3.3 pp in Q4 2018. Growth in machine and equip-
ment investment moderated significantly to 8.4% from 12.3% in Q4, ending the consecutive double-digit growth for the past six
quarters. Private consumption growth picked up to reach 5.3% in Q1 compare to 5.2 in Q 2018
Investment Growth continued to soften
The nominal current account deficit narrowed in Q1, in line with the slowdown in investment
USD billion
Source: BPS & World Bank
%
%

7. Economic & Fiscal Update
“The country needs fiscal discipline to build a strong economy and for social justice”
- Smriti Irani
Real imports contracted sharply: The contraction in real imports, which was also in light of slowing investment growth, was
almost four times greater than that in real exports, leading net exports to support growth for the first time since Q3 2017. De-
spite robust domestic private consumption, real imports shrank 7.8% in Q1, mostly driven by the reduction in oil and gas im-
ports by 22.9 %, which was in turn partly due to the Government mandate to use biofuel in the diesel mix and Government poli-
cies to manage the imports of certain commodities, which has been implemented in the 2nd half of 2018. Meanwhile, the con-
traction in exports was mostly due to oil and gas goods exports, dipping 0.7% after growing 6.0 % in Q4 2018, in line with the
reduction of Indonesia’s oil lifting and the Government policy that prioritized domestically-produced oil for domestic consump-
tion rather than for exports
Export & Import
Source: BPS & World Bank

8. “Every adversity, every failure, every heartache carries with it the seed of an equal or greater benefit”
-Napoleon Hill
KIB Trade Talk
July 25, 2019, Grand Mercure Hotel, Kemayoran—Jakarta
Problems identified:
Context:
The infamous trade war between the US and China has boosted Vietnam’s FDI by 16-fold in
just 9 months, making them the official “winner” of this situation. In contrast, the gap between
Indonesia’s import and export just keeps getting wider. Indonesia’s declining exports have
been going on since way before the US-China Trade War happened. Instead of blaming our
trade deficit on this “war,” we should be seeing this as a wake-up call. At the moment, the
country’s main focus is to increase export and foreign investments. However, more important-
ly, Indonesia needs to be agile and ready to break into foreign markets besides the US and
China. In terms of product quality, we are better than Vietnam. The only things we are lacking
are exposure and capacity, which is why local businesses and the government need to work
hand in hand to make Indonesia better.
L-R : Rudy Luwia, Noni Purnomo, Bambang Suwarso, Shanti Shamdasani, Nurlaila Muhammad, Rudy Rahmaddi
Weak
Competitiveness
Govt. & Private
Disintegration Inefficiency
Low demand in
commodity
Unsolved manufactur-
ing problems
Unskilled
workforce

9. “For every benefit you receive a tax is levied”
-Ralph Waldo Emerson
KIB Trade Talk
July 25, 2019, Grand Mercure Hotel, Kemayoran—Jakarta
Focus in signifi-
cant regional and
multilateral rela-
tionship
Enhance Govt. &
Private Collabora-
tion and promote
real integration
Create more
Pro-industry
policies
Low demand in
commodity
Promote commodity
shifting by creating
value-added products
Start investing in
PEOPLE
Proposed Solutions:
*) There needs to be a synergy between the government and business owners. Businesspeo-
ple need to embrace a healthy relationship with government agencies. Through this partner-
ship, we ultimately hope to achieve better import/export and pro-industry policies. This easier,
simpler procedure could attract more foreign direct investments (FDI) in Indonesia, hence,
more job opportunities for Indonesians.
*) Businesses have to start investing in people who can liaise with the government, whose job
it to build and maintain a healthy relationship with them. This should not be the obligation of
business owners only and should not happen only when they are in need of favors from the
government.
*) We need to identify potential growth areas in Indonesia and make quick-win initiatives for
the short-run. Find the reformists, sit together with them, build a roadmap, and establish a vi-
sion/goal to achieve together in the long-run.
*) Indonesia needs to shift from raw commodities (e.g. mining, agribusiness, etc.) to the manu-
facturing sector to compete in foreign markets. Local businesses must act quick and make use
of this time to push exports before the US removes Indonesia from Generalized System of
Preferences (GSP).
*) Right now, Indonesia can find huge opportunities in labor intensive sectors because we
have a huge working age population.
*) Eventually, Indonesia would want to adopt a “disruptive” strategy: Automation. We should
invest in more machines, as the rest of the world is progressing towards less manual (human)
labor jobs.
*) Indonesia should be more involved in international projects to increase exposure. For exam-
ple, Indonesia should try to get a more significant role in China’s Belt and Road initiative (BRI).
*) We need to improve the quality of our workforce, as the output we produce for our investors
is not as good as the one they can get from other countries. One thing Indonesia can learn
from Vietnam is their consistency and focus on giving high quality products.

10. Directorate General of Taxation (DGT)
Passed Regulations
“Incentives are not strategy, they are tactics. Defensive measures.”
- Carlos Ghosn
PMK-150/2018 PMK-167/2018 PMK-205/2018 PMK-212/2018
Tax Holiday
Provision of Food and
Beverages
(compensation)
Use of Book Value Deposits & Savings
PMK– 85/2019 PMK-92/2019 PMK-213/2018 PMK-215/2018
Treasurer Supervision Luxury Goods Regulation simplified Instalments
Ministry of Finance
Directorate General of Taxes
PER-29/2018 PER-30/2018 PER-14/2019 PER-05/2019
Support on Infrastructure
Viability Gap Fund
Regulation
simplified
Revocation of PER
32/2010
Zakat
PER-26/2018 PER-09/2019 PER-03/2019 SE-08/2019
SSP validation for
Developer
Revocation of Notice of
Tax Exemption PP
23/2018
Tax Clearance
Certificate (SKF)
Cost of Benefit
Claims of Life
Insurance
PP 50/2019
Non-collective of VAT on the Imports and Deliveries of Certain
Means of Transport and on the deliveries of Taxable Services
related to certain means of Transport
Others
VAT on Imported Services

11. Directorate General of Taxation (DGT)
The New Era of Tax Holiday
PMK 35/2018 150/2018
“The best things in life are free, but sooner or later the Government will find a way to tax them.”
-Anonymous
1
Coverage of
Pioneer Indus-
tries
2Reduction of
Minimum
Investment
Threshold
3
Procedure
Simplification
4
Legal
Assurance
Then : 9 industries
Now: 18 Industries
Then : min. 1T; 500 M
Now : min. 100 M
Then: Verification committee
required
Now: 5 days OSS Verification
Then : Timeline unclear
Now : Timeline clear
based on value of invest-
ment
Entitled Tax Payer Form of Facilities
100M to <500 M Min. 500 M
50 100
5 years 5-20 years
2 year relaxation
(25%)
2 year relaxation
(50%)
%
Resident Taxpayer
Pioneer Industries
( in exception of article 5)
New Capital investment
Meets DER requirement
Obtained Indonesian Legal Entity

12. Directorate General of Taxation (DGT)
SUPER DEDUCTION
The Background
“You can’t tax business. Business doesn’t pay taxes. It collects taxes.”
-Ronald Reagan
Promote Full Employment
Create Qualified Workforce (Link & Match)
Create high-valued Goods & Services
Policy Setting
Super Deduction Incentive and Investment Allowance
Income Tax Law
article 35
PP 45/2019
RPMK Investment Allow-
ance facility for Labor in-
tensive industry
RPMK Super Deduction
Facility for Work Practice
& Internship (vocation)
RPMK Super Deduction
Facility on Research and
Development
Scale of the facility
Type of Business & No. of employees
Facility application & mechanism
Scale of the facility
Type of Work Practice & Internship
Facility application & mechanism
Scale of the facility
Type of Research & Development
Facility application & mechanism

13. Directorate General of Taxation (DGT)
SUPER DEDUCTION
Investment Allowance for Labor Intensive Industry (export oriented)
“The power to tax is the power to destroy”
- John Marshall
Requirement
Resident Corporate Tax Payer ,who is making fresh (new) capital investment
or extending a certain type of business provided with the following criteria:
• Labor intensive industry and
• Were not granted facility which was stipulated on income tax law article
31A or article 29 (1)
Form of Incentive
• 60% of Net-income reduction taken from the amount of capital investment:
fixed asset including land—used for main production & business activity.
• Charge applicable for 6 years @ 10% per year.
Procedure
• Application should be submitted through OSS (online single submission )
system
• Criteria matching through OSS
• Application status result: 5 working days
(from the date of application received)

14. Directorate General of Taxation (DGT)
SUPER DEDUCTION
Work Practice & Internship (Vocation)
“The power to tax is the power to destroy”
- John Marshall
Entitled Subject
• Resident Tax Payer
• Bearing the cost for work practice, internship and/or on-field study in hu-
man resource development and advisory based on certain competence
• Having work agreement with SMK, MA Kejuruan, PT Program Diploma,
BLK, or civil government unit whose business is dedicated in labor devel-
opment program
• Not in a net-loss fiscal performance during the year of application
Form of Facility
Up to 200% gross income reduction from the cost claimed, including:
A. 100% from incurring cost that relates to vocation activity
B. An additional 100% of incurring cost as mentioned on the above
Type of Vocation
A. Work Practice and/ or internship that is being held in the Resident Tax
Payer
B. Study that is being organized by a third party who was assigned by the
resident tax payer to teach in SMK, MA Kejuruan, PT Program diploma
and/or BLK.

15. Directorate General of Taxation (DGT)
SUPER DEDUCTION
Research and Development
“The power to tax is the power to destroy”
- John Marshall
Entitled Subject
Resident Tax Payer who is conducting a certain research and develop-
ment project
Form of Facility
Up to 300% gross income reduction
Facility—Time of use
Dedicated to a certain research and development
• proven research result being used on production activity or
• patent certification
Type of Opex and Capex
Assessment
Annual assessment held by Kemenperin/Kemenristek precedes the
research and development

16. Contact Us
Phone:
(62-21) 2929 5870-73
Bambang B. Suwarso
bambang.suwarso@kib-
consulting.com
Rachmat Kurniawan
rachmat@kib-
consulting.com
Yosefine Amelia
yosefine@kib-
consulting.com
Raden Roro Ratna
Indah Wulandari
wulan@kib-
consulting.com
Address:
The Koppel Building
Suite IB.
Jalan Pluit Selatan
Raya no. 10
Jakarta Utara– 144550
Indonesia
www.kib-consulting.com
Disclaimer:
The facts and opinions stated or expressed in this
publication are for information purposes only, and
are not necessary and/or must not be relied upon
as being to those of the publisher or of the institu-
tions for which the contributing authors work.
Although every part of content has been taken to
ensure the accuracy of the information contained
within this publication, it should not be by any
person relied upon as the basis for taking any
action or making any decision.
KIB Consulting and its representative, cannot be
held liable or otherwise be responsible in anyway
for any advice, action taken or decision made on
the basis of the facts, surveys, and opinions stated
or expressed within this publication.
Our Involvement
Radju Munusamy & Bambang Suwarso
KADIN Focus Group Discussion on Trade
War
KADIN—Focus Group Discussion on Trade War

17. Contact Us
Phone:
(62-21) 2929 5870-73
Bambang B. Suwarso
bambang.suwarso@kib-
consulting.com
Rachmat Kurniawan
rachmat@kib-
consulting.com
Yosefine Amelia
yosefine@kib-
consulting.com
Raden Roro Ratna
Indah Wulandari
wulan@kib-
consulting.com
Address:
The Koppel Building
Suite IB.
Jalan Pluit Selatan
Raya no. 10
Jakarta Utara– 144550
Indonesia
www.kib-consulting.com
Disclaimer:
The facts and opinions stated or expressed in this
publication are for information purposes only, and
are not necessary and/or must not be relied upon
as being to those of the publisher or of the institu-
tions for which the contributing authors work.
Although every part of content has been taken to
ensure the accuracy of the information contained
within this publication, it should not be by any
person relied upon as the basis for taking any
action or making any decision.
KIB Consulting and its representative, cannot be
held liable or otherwise be responsible in anyway
for any advice, action taken or decision made on
the basis of the facts, surveys, and opinions stated
or expressed within this publication.
Our Involvement
2019
New Economic Fulcrum in The Making
http://pacificexposition.co.nz/

18. Contact Us
Phone:
(62-21) 2929 5870-73
Bambang B. Suwarso
bambang.suwarso@kib-
consulting.com
Rachmat Kurniawan
rachmat@kib-
consulting.com
Yosefine Amelia
yosefine@kib-
consulting.com
Raden Roro Ratna
Indah Wulandari
wulan@kib-
consulting.com
Address:
The Koppel Building
Suite IB.
Jalan Pluit Selatan
Raya no. 10
Jakarta Utara– 144550
Indonesia
www.kib-consulting.com
Disclaimer:
The facts and opinions stated or expressed in this
publication are for information purposes only, and
are not necessary and/or must not be relied upon
as being to those of the publisher or of the institu-
tions for which the contributing authors work.
Although every part of content has been taken to
ensure the accuracy of the information contained
within this publication, it should not be by any
person relied upon as the basis for taking any
action or making any decision.
KIB Consulting and its representative, cannot be
held liable or otherwise be responsible in anyway
for any advice, action taken or decision made on
the basis of the facts, surveys, and opinions
stated or expressed within this publication.
Our Involvement

19. Contact Us
Phone:
(62-21) 2929 5870-73
Bambang B. Suwarso
bambang.suwarso@kib-
consulting.com
Rachmat Kurniawan
rachmat@kib-
consulting.com
Yosefine Amelia
yosefine@kib-
consulting.com
Raden Roro Ratna
Indah Wulandari
wulan@kib-
consulting.com
Address:
The Koppel Building
Suite IB.
Jalan Pluit Selatan
Raya no. 10
Jakarta Utara– 144550
Indonesia
www.kib-consulting.com
Disclaimer:
The facts and opinions stated or expressed in this
publication are for information purposes only, and
are not necessary and/or must not be relied upon
as being to those of the publisher or of the institu-
tions for which the contributing authors work.
Although every part of content has been taken to
ensure the accuracy of the information contained
within this publication, it should not be by any
person relied upon as the basis for taking any
action or making any decision.
KIB Consulting and its representative, cannot be
held liable or otherwise be responsible in anyway
for any advice, action taken or decision made on
the basis of the facts, surveys, and opinions stated
or expressed within this publication.
Our Involvement

20. KADIN Talk with Minister or Finance Sri Mulyani
Coordination Meeting—Pacific Exposition
Contact Us
Phone:
(62-21) 2929 5870-73
Bambang B. Suwarso
bambang.suwarso@kib-
consulting.com
Rachmat Kurniawan
rachmat@kib-
consulting.com
Yosefine Amelia
yosefine@kib-
consulting.com
Raden Roro Ratna
Indah Wulandari
wulan@kib-
consulting.com
Address:
The Koppel Building
Suite IB.
Jalan Pluit Selatan
Raya no. 10
Jakarta Utara– 144550
Indonesia
www.kib-consulting.com
Disclaimer:
The facts and opinions stated or expressed in this
publication are for information purposes only, and
are not necessary and/or must not be relied upon
as being to those of the publisher or of the institu-
tions for which the contributing authors work.
Although every part of content has been taken to
ensure the accuracy of the information contained
within this publication, it should not be by any
person relied upon as the basis for taking any
action or making any decision.
KIB Consulting and its representative, cannot be
held liable or otherwise be responsible in anyway
for any advice, action taken or decision made on
the basis of the facts, surveys, and opinions stated
or expressed within this publication.
Our Involvement
FGD meeting