The government plans to lower the tax rate on dividends to 15% from 20% in an effort to improve the investment climate and encourage the development of financial markets, the tax chief said, reported Reuters.
The government is keen to develop the country's young financial market by improving regulations and providing tax incentives for people still wary of investing in the stock market.
"We want to attract more people to invest and not only put their money in banks ...The substance of the new tax bill is to improve our investment climate," Darmin Nasution said. "The discussion is whether a tax rate of 15% would provide a sufficient incentive."
The government is hoping to draw more people to put their funds in the market by cutting the tax rate on dividends which currently is the same as that on bank interest. The plan is one of a string of measures in a new tax law being drafted by the parliament aimed at tackling widespread tax evasion and providing tax incentives to investors in the country.
The parliament is expected to pass the tax bill in the third quarter. The bill also proposes to cut income tax levels for individuals and corporations in a bid to attract investors to open businesses.