Indonesia Passes Law to Cut Corporate Tax, Simplify Labor Rules

(Bloomberg) — Indonesia has rushed the approval of a law aimed at creating jobs and attracting investments, a day before 2 million workers were set to protest against it.

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Workers transport carts loaded with boxes at Tanah Abang market in Jakarta, Indonesia, on Tuesday, Aug. 4, 2020. Indonesia is scheduled to announce its second-quarter gross domestic product (GDP) figures on Aug. 5.

The parliament agreed to pass the omnibus bill on jobs in a plenary meeting on Monday. That’s one day before labor unions were planning to stage a national three-day strike across 300 cities to reject it. The parliament was previously set to hold its plenary meeting on Oct. 8.

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The law that seeks to simplify and revise more than 70 existing regulations will overhaul the country’s labor rules, make it easier for companies to secure permits and ease foreign ownership rules. Its passage means the corporate income tax will be gradually lowered to 20%, from 22% currently, while some dividend taxes will be exempted.

The bill’s passage may help President Joko Widodo shore up an economy that’s set to slip into another contraction this quarter as the continued spread of the coronavirus damped household spending and investments. The government has sought to speed up state spending, while warning that growth can’t come from the public sector alone.

The law has been met with opposition from labor unions and politicians who sought to reject the reduction in severance pay and the introduction of indefinite labor contracts. Activists have also spoken out against the bill, which exempts investments judged to be low-risk to go ahead without submitting a report on their expected environmental impact.

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