Thu, 21 Feb 2008
Ika Krismantari and Agustina Wayansari, The Jakarta Post, Jakarta

he government's plan to charge value-added tax for the use of electricity beyond 1,300 watts has been criticized, with one group calling the decision borne of political interests.

Indonesian Chamber of Commerce and Industry (KADIN) vice chairman Chris Kanter told The Jakarta Post on Wednesday the government wanted to "play it safe" by not increasing prices to keep up with the current global economic recession.

"But it's better to make a bold decision by increasing prices and explaining the real situation to the public rather than creating such a policy (charging tax) that can't be implemented," he said.

The administration of President Susilo Bambang Yudhoyono had earlier pledged not to increase power tariffs through 2009 when its term ends.

The House of Representatives' Commission VII overseeing energy and mineral resources has also criticized the policy, saying the government should introduce the policy to the public before implementing it.

The new tax would mainly affect middle-class households and small-medium enterprises.

Currently, value-added tax is already imposed for electricity use above 6,600 watts, affecting mostly factories and offices.

Director general for taxation Darmin Nasution said the plan to impose a 10 percent tax was still being discussed in detail.

However, he said the initiative did not come from his office.

"The plan is being discussed within the framework of the revision to this year's state budget," Darmin said as quoted by Antara on Wednesday.

With this policy, the government expects to generate Rp 2.1 trillion (US$229 million) in tax revenue this year, helping to lower the electricity subsidy without increasing electricity tariffs.

The policy would go with the new progressive-rate billing system and begin in May, and would reward households that keep 2008 consumption to 80 percent of 2007's national average electricity consumption.

Household power capacity is currently grouped at either 450, 900, 1,300 or 2,200 watts.

PLN subsidizes household electricity use, which accounts for almost 90 percent of total national electricity use.



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