Creativity sought to avoid burdening business<\/p>\n
The government's plan to increase tax revenue and cut
\nsubsidies on fuel and electricity has raised concern in the
\nbusiness community and among analysts. Economist Sri Adiningsih
\nof Gadjah Mada University in Yogyakarta spoke to The Jakarta
\nPost's Sri Wahyuni about the issue.<\/p>\n
Question: What is your comment on the government's plan?<\/p>\n
Answer: From a tax ratio point of view, our tax ratio is very
\nlow compared with other countries that are highly competitive,
\nsuch as Malaysia, Singapore and even the U.S., where the tax
\nratio is some 20 percent. Ours is estimated at only 13.3 percent
\nfor the year 2003. This means that the country's existing tax
\npotential has not been exploited very well.<\/p>\n
However, we have to be very careful in doing so because if we
\ncollect taxes haphazardly, it will directly affect the country's
\ncompetitiveness.<\/p>\n
We have to remember that we entered the ASEAN Free Trade Area
\nin Jan. 1 this year. Yet our competitiveness is quite low, the
\nlowest in the region, and our export growth is also very low
\nwhile investment is stagnant.<\/p>\n
Therefore, if we are not careful about increasing tax revenue
\nit (the plan to increase tax revenue) will backfire.<\/p>\n
Could you elaborate?<\/p>\n
If our competitiveness is unattractive it will be hard to
\nincrease exports, much less to achieve economic growth of 5
\npercent. To have that kind of growth we need to increase exports
\nand investment growth by up to at least 10 percent. This will
\nobviously have something to do with taxation.<\/p>\n
Indonesia's taxation and assessment system is not attractive
\ncompared to those of our competitors. Although tax revenue is
\ngenerally not high, if we look at more detailed figures we will
\nsee that Indonesia applies a corporate tax of 30 percent. Compare
\nthat to Singapore, for example, where the corporate tax is only
\n26 percent, or Malaysia with a corporate tax of 28 percent.<\/p>\n
Besides there are also various kinds of assessments and other
\nlevies, both official and unofficial, that businesspeople in
\nIndonesia must pay, which explains why some businesses spend up
\nto 50 percent of their operational costs paying taxes and
\nassessments.<\/p>\n
This is indeed a big problem. I agree that we need to increase
\nthe tax ratio, but we have to prevent it from backfiring on the
\ncountry's already worrying competitiveness.<\/p>\n
What is your suggestion?<\/p>\n
The country's whole tax system should be corrected. As you may
\nknow, the inheritance tax is one of the biggest tax revenue
\nproducers in developed countries. We don't have such a tax here.
\nThis is a mistake.<\/p>\n
Let's say that the value of Indonesia's moving assets is some
\nRp 250 trillion a year. If we apply an inheritance tax rate of 20
\npercent, for example, then the country would have additional
\nrevenue of some Rp 50 trillion a year. This is obviously quite a
\nlarge sum of money.<\/p>\n
The point is, again, that we need to look for new taxes, but
\nnever ever squeeze the (sectors) that will directly affect the
\ncountry's competitiveness. Putting the taxation and assessment
\nsystem in order will also help increase the country's
\ncompetitiveness, because taxes and assessments have for a long
\ntime burdened the industrial sectors, not just the unofficial
\nones but also the official ones.<\/p>\n
Therefore, I think it's time for the government to consider
\ntaxation as a form of investment, by regulating and putting it in
\norder so that the effort to increase the country's tax ratio will
\nnot hit its competitiveness.<\/p>\n
In this case, creativity in creating new taxes that will not
\nburden the business world is urgent. And the inheritance tax is
\nan example.<\/p>\n
Is such a tax possible in the near future?<\/p>\n
If we started preparing it now, I think we would be ready to
\napply it in within a year or two. Remember that we have to find a
\nway to pay the public debt interest without burdening the state
\nbudget. If we can create a new tax source, for example the
\ninheritance tax, we would be able to at least pay a part of the
\npublic debt interest.<\/p>\n
What of the government's plan to cut subsidies on fuel and
\nelectricity? Would this have a large effect on business?<\/p>\n
The subsidy cuts for fuel and electricity will not directly
\naffect the business world. And if it does, it will not be that
\ngreat. That is because businesses pay the market price for fuel
\nand electricity. What will be directly affected by the cuts is
\ninflation.<\/p>",
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