State May Ease Taxes on Low-Income Workers to Help Meet Daily Needs

State May Ease Taxes on Low-Income Workers to Help Meet Daily Needs

Camelia Pasandaran & Elisabeth Oktofani

The government is pushing to raise the cap on tax-exempt income in an effort to help workers take home more of their pay, the manpower and transmigration minister said on Wednesday.

Muhaimin Iskandar said the state was considering more than doubling the threshold on tax-exempt monthly income to Rp 2.6 million ($300) from the current Rp 1.32 million.

“This is to free [low-income] workers from the burden [of paying tax],” he said on Wednesday.

President Susilo Bambang Yudhoyono, speaking at a Labor Day event on Sunday, said he had asked concerned ministries to recalculate the maximum level of income not subject to tax.

“I’ve already asked the Manpower and Transmigration Ministry to work with the Finance Ministry and the tax office to review the appropriate amount that should be subject to tax,” he said. 

“Those who cannot afford to pay tax should be exempt from it. They only earn enough to meet their daily costs of living, so it would be unfair to tax them,” the president said.

Under current regulations, monthly income in excess of Rp 1.32 million, but below or equal to Rp 2.6 million, is subject to 10 percent tax. Those earning above this bracket pay 15 percent.

“The target is to double [the threshold]. But at the very least, the tax-exemption level could be raised 75 percent,” he said, adding that the tax directorate had yet to approve the proposal.

But Muhammad Isnur, from the Jakarta Legal Aid Foundation (LBH), was not so keen on the plan, saying it did not address the real problem. “The issue here is having a decent salary to meet daily needs,” he said.

The minimum wage in the capital is Rp 1.29 million, with many workers receiving much less.

Muhaimin said the government was also planning to revise the law governing outsourcing but needed time to negotiate with companies and workers.

Labor unions have long campaigned for the abolition of outsourcing, which allows companies to hire workers on a contractual basis and are thus not obliged to provide severance, health insurance or pensions.

The minister said the government was considering banning the practice, unless for additional work or jobs not integral to a company’s day-to-day operations. “But it should be supervised and guided,” he said.

“But again, we need to discuss it once more with business associations,” he said. “So far, I have received no complaints in response to [the plan].”

On Labor Day, Muhaimin also promised to improve the social security system for workers (Jamsostek), including extending health coverage to include heart disease.

May Day Rallies Call for Higher Pay and Social Security

May Day Rallies Call for Higher Pay and Social Security

The overwhelming message on May Day from the thousands of workers who took to the streets in rallies nationwide was a call for better wages amid tougher working conditions.

In the capital, employees from various industries descended on the Hotel Indonesia traffic circle in Central Jakarta on Sunday. Among them were members of the Alliance of Independent Journalists (AJI), who carried a mock cage to protest their working conditions.

Winuarto Adhi, head of the AJI union, told the Jakarta Globe that they were demanding greater protection from the government in response to the growing number of acts of violence against journalists.

“Indonesian journalists face bigger challenges these days, such as an intimidation, threats or destruction of property,” he said “This is evident in the increasing number of violent incidents targeted at journalists. Unfortunately, these cases have rarely been thoroughly investigated by the police.”

Siti Damiti, a street vendor at the rally in Jakarta, bemoaned rising food prices and the perceived marginalization of informal-sector workers.

“Even though food was expensive before, at least we didn’t have to leave home to earn enough to eat,” she said.

She added that she was disappointed with President Susilo Bambang Yudhoyono for neglecting the poor and kowtowing to foreign investors.

“If he wants to make things better, he shouldn’t let foreigners exploit Indonesia and make us strangers in our own land,” Siti said. In Bogor, 500 workers from various factories in the area took part in a similar rally.

Devi, a worker at a textile plant, claimed that she only earned Rp 930,000 a month ($110), far below the minimum wage in Bogor of Rp 1.17 million. She said she could earn Rp 1.6 million, but that would mean working a 12-hour shift.

Yuyus said that he felt compelled to keep working to support his family. He said his job at a mattress factory paid him Rp 1.9 million a month, which was just enough to cover the needs of his wife and four children.

“I’ve worked for 20 years [at the factory], and even though I’m nearing retirement age, I’ve got to keep working because I’m the sole breadwinner in the family,” he said.In Malang, East Java, around 600 workers marched on the City Council to protest violations of the minimum wage, union-busting tactics by employers and the lack of social security for workers’ families.

Mistiani, a factory worker and mother of one, said that she only earned Rp 800,000, while the minimum wage was Rp 1.08 million.“The unions have repeatedly pressed for a wage hike in line with the minimum wage, but to no avail,” she said.

The rally was closely guarded by 600 police personnel and proceeded peacefully. But in Makassar, South Sulawesi, protesters blocked the road to the city’s Sultan Hasanuddin Airport, forcing flight delays of up to half an hour.

The members from nine unions made an attempt to take over the airport but were held off by 300 riot police. They finally dispersed after a two-hour standoff.

Labor Day: Workers Can’t Afford to Quit Despite Complaints

Labor Day: Workers Can’t Afford to Quit Despite Complaints

Mulyadi is 25, but he’s lost count of how many times in the past three years he has switched factories. 

He works in one for a few months before moving to another, all within Jakarta’s massive Kawasan Berikat Nusantara industrial estate in the Cakung-Cilincing area. 

Thousands of contract factory workers are employed at the KBN in any given year. Some of those workers have worked within the KBN for more than a decade, despite regulations aimed to prevent it. 

“I work mostly for garment factories. The money’s the same everywhere at KBN. I earn Rp 1.38 million [$160] per month,” Mulyadi told the Jakarta Globe. 

“Why do I move around? Not by choice, I can tell you. They’ll just give me a three-month contract or a six-month contract. That’s a lot pressure for us [to turn down the offer], because we know how hard it is to get jobs nowadays,” he said on Friday, two days before May Day demonstrations are expected to hit the capital’s streets. 

“What all of us here at the KBN are most concerned about, though, is unpaid overtime hours. We have to meet the production target, which is quite high. The target depends on company regulations and the type of clothes produced. Sometimes some of us don’t get paid overtime, but we cannot afford to leave.” 

Mulyadi said he would not be among the thousands expected to protest on Sunday. Instead, he said he would join demonstrations on Monday — the details of which were unclear — since Sunday was his day off. 

A Jakarta legal aid group said in February that it received almost 200 labor complaints last year that pointed to the uphill battle workers continued to face in claiming their legal rights. 

Muhammad Isnur of the Jakarta Legal Aid Foundation (LBH) said labor disputes over the lack of insurance, wrongful termination, problematic contracts and outsourcing led to 191 complaints being filed by more than 3,000 workers in 2010. 

“We received complaints about unlawful dismissals, [wage] payments being put on hold and the status of contract workers,” Isnur said. 

According to the 2003 Labor Law, a person can only be employed as a contract worker for two years, with a one-year extension option. Contract workers, he said, are not entitled to receive benefits such as raises, with many being paid less than the standard minimum wage (UMP). 

“A [permanent] worker’s rights include a health insurance scheme, a pension fund, leave, overtime and being paid in accordance with the UMP,” he said. 

The 2011 UMP for Jakarta is Rp 1.29 million per month, a 15.8 percent increase from last year. Labor unions, however, have said the figure is too low. They cite the Reasonable Living Cost Index (KHL), which has been set at Rp 1.4 million per month. 

Laborers at the KBN said their daily problems were usually quite simple, but they still remained unresolved. 

Yana, a 32-year-old mother of two, said her major problem at the garment factory was that the model for the clothes was too complicated at times, and that workers could not go home until all the day’s work was finished. 

“Our main problem is the high production target. Every garment model is different. We could produce, for instance, 200 pieces in an hour or 400 pieces in an hour. It depends on the make of the clothes. We hate that pressure. We have to finish in eight hours of work, or work overtime until we finish, before we can go home,” Yana told the Globe. 

Etty, 27, said she had worked at the KBN since 1999, and she knew that many of the factories there did not pay for menstrual leave. “Every month, the law requires that all female workers are given two days of paid menstrual leave. The company should pay us as much as Rp 92,000 for this leave, but it doesn’t. We lose money like this, but not everybody realizes that,” Etty said. 

“Aside from the short-term contracts and unpaid overtime hours, we have many other concerns. However, we are actually quite afraid to join the [May Day] rally. We do not want to lose our jobs.” 

A male worker who refused to give his name said he would likely not join in the demonstrations on either Sunday or Monday because he was not a member of a labor union. 

“Unless we join a labor union, we do not know what it is we are going to rally for. Most of the time these rallies are organized by labor unions, but our company does not have a labor union,” the worker said. 

Budi Wardoyo, secretary general for the Indonesian Labor Movement Association (PPBI), said 100,000 workers were expected to join Sunday’s May Day demonstrations. 

He said the rally would start at 9 a.m. at the Hotel Indonesia traffic circle. From there, demonstrators would march toward the Presidential Palace.