Business leaders doubt state budget targets<\/p>\n
Tony Hotland, The Jakarta Post\/Jakarta<\/p>\n
Noted businesspeople have expressed doubt over the 2005 state
\nbudget draft, saying the targets contained in the budget are
\nunrealistic and could harm investment.<\/p>\n
Indonesian Chamber of Commerce and Industry (Kadin) chairman
\nMohammad S. Hidayat warned that the government's target of higher
\ntax revenue for 2005 should not curtail the flow of investment.<\/p>\n
\"I think the target is ideal, but the government has to make
\nsure it will not hamper new investment due to higher taxes,\"
\nHidayat said on Monday after the presentation of the draft budget
\nby President Megawati Soekarnoputri.<\/p>\n
The government hopes to collect some Rp 297.5 trillion
\n(US$32.11 billion) in tax revenue next year, including Rp 141.9
\ntrillion from income tax, Rp 98.8 trillion from value-added and
\nluxury taxes, and Rp 28.9 trillion from excise duties.<\/p>\n
That figure is higher than the 2004 tax revenue target of Rp
\n260 trillion. There are fears among the business community that
\nhigher tax revenue will be achieved through increases in the tax
\nrates.<\/p>\n
\"The tax rate is used to support state revenue and to attract
\ninvestment. No investment will come if taxes are too high. It is
\nan important factor to meet the targeted economic growth of 5.4
\npercent because we cannot always rely on (domestic) consumption,\"
\nHidayat said.<\/p>\n
The country's economic growth over the last few years has been
\nlargely driven by domestic consumption. Over this period,
\ninvestment, particularly foreign investment, has lagged behind
\ndue to what is seen as an unfavorable investment climate here.<\/p>\n
Hidayat also said the projected economic growth of 5.4 percent
\nin 2005, compared to expected growth of 4.8 percent in 2004, was
\na bit too optimistic, pointing out that there were no adequate
\nincentives to provide a significant boost to investment.<\/p>\n
\"Kadin sees 5 percent growth. But the government first needs
\nto assure legal certainty, to simplify the bureaucracy at the
\nInvestment Coordinating Body and provide conducive laws on
\ntaxation and investment,\" he said.<\/p>\n
Hidayat lamented the small allocation for the building of
\ninfrastructure, about Rp 12.4 trillion of total state
\nexpenditures of Rp 264.9 trillion.<\/p>\n
\"It should be about Rp 50 trillion to help jack up the
\neconomy. Unfortunately, we have to set aside as much as Rp 64
\ntrillion just to service public debt. That's the problem,\" he
\nsaid.<\/p>\n
The chairman of the Indonesian Employers Association, Sofjan
\nWanandi, dismissed the possibility of increased tax rates, saying
\nsuch a move was \"impossible\".<\/p>\n
\"There is no way the government can increase rates in a
\nsituation like now where investment is slack. In fact, the
\ngovernment should lower the rates to make us competitive with
\nsurrounding countries,\" he told The Jakarta Post.<\/p>\n
Sofjan said the most feasible way to increase tax revenue was
\nto increase the number of taxpayers.<\/p>\n
\"For example, if the government could combat all kinds of
\nillegal economic activities (like smuggling), the government
\nwould surely reap more taxes,\" he said.<\/p>\n
Sofjan said all of the economic targets in the draft bill were
\nunrealistic, speculating that there was a political motive behind
\nthem to help Megawati win reelection.<\/p>\n
\"How is the economy going to grow by 5.4 percent with sluggish
\ninvestment and a minimal allocation for development, since most
\nof the expenses are for the gas subsidy and debt payments? The
\ngovernment does not even have money left for the maintenance of
\ninfrastructure,\" he said.<\/p>",
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