Indonesia are reviewing their land taxes to improve the distribution of wealth.
The tax system for land in Indonesia is currently under review. The aim of any amendment, according to the chief economic minister, is to generate more state revenue for the country and in a bid to improve the country’s wealth inequality. It would mean land prices are controlled more tightly and ensure that land ownership is spread more evenly rather than just being held within a small group.
The reason that new taxes are being considered is that any new proposed development creates a flurry of activity. Speculators purchase land around the said development anticipating a ripple effect of capital appreciation that the development brings. This pushes up land prices, which can have a detrimental effect as it prevents the building of affordable housing. Many cities already have a deficit in affordable housing since high land prices ensure that this sector of housing is not feasible option for land prime for development.
Therefore the government have announced plans of a progressive land tax. The purpose is to put a halt to speculative land buying that restricts infrastructure and property developments. Additionally, there is talk of introducing a higher tax bracket for those selling land in a short-time frame to put people off short term land trading.
Capital gains is another tax also being considered by the government. This would mean a higher tax rate for those owning more land. This would replace the existing structure for taxes on land transactions. Finally, a ‘landbank tax’ is also under discussion. Targetting companies which hold onto land who do not have any clear intentions for it to free it up for development.
The proposed taxes are in the discussion stages but are expected to come into play later this year.
