REPUBLIKA.CO.ID, JAKARTA -- The House of Representatives' Commission XI here on Thursday approved the finance minister's proposal to raise the standard personal allowance for taxation from initially Rp2.025 million to Rp3 million per month.

Commission XI Chairman Fadel Muhammad stated that the commission fully supported the government's proposal.

"We have discussed the matter, and what the minister has explained is clear and has been accepted by Commission XI," he revealed.

Based on the approval, Finance Minister Bambang Brodjonegoro said he will prepare a ministerial regulation on the change, so that it can come into effect from July 1, 2015, and thus, the companies will not be allowed to levy tax on workers whose income falls below Rp3 million a month, or Rp36 million a year.

"As of July 1, 2015, companies will cut taxes from their workers' wages based on the new PTKP (standard personal allowance)," Director General of Tax Sigit Priadi stated.

In his explanation, Finance Minister Bambang Brodjonegoro said the adjustment had been made based on several considerations, including the economic slowdown, the need to increase the public's purchasing power, and the need to adjust with the hike in the provincial minimum wage of 2015.

He expressed hope that the adjustment would help to boost the economy, investment, and public consumption.

Based on his calculations, Bambang explained that if it could be immediately made effective, the new PTKP could increase economic growth by 0.09 percent, household consumption by 0.07 percent, investment by 0.19 percent, and inflation by 0.04 percent.

The implementation of the new PTKP will be in concurrence with the extension of the 13th month's salary to government employees, military and police personnel, and state officials.

In 2013, the increase in PTKP from Rp15.8 million to Rp24.3 million a year boosted the economic growth in 2013 by 0.08 percent and increased employment by 0.0031 percent of the 2013 target.

In the first quarter of 2015, the country's economic growth was recorded at 4.7 percent. Public consumption has been the biggest contributor to the growth, which was up by 5 percent or stagnant as compared to that recorded in the fourth quarter of 2014. Public consumption had touched 5.5 percent when the PTKP hike was implemented in the first quarter of 2013.

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