Delayed tax refunds<\/p>\n
Minister of Finance Mar'ie Muhammad's admission of the large
\namount of tax-refund arrears at the Directorate General of Tax
\nonce again demonstrates how a well-designed incentive to promote
\nexports often turns out to be meaningless due to extremely
\ninadequate and inefficient administrative arrangements. Mar'ie
\nacknowledged at a House hearing last week that many exporters had
\noften complained about the long delays in tax refunds by the
\nDirectorate General of Tax. Such delays obviously adversely
\naffect their cash flow and this is especially harmful to local
\ncompanies which have to pay high bank interest. The finance
\nminister did not specify the amount of tax-refund arrears
\naccumulating at the directorate general but he admitted it was
\nfairly big.<\/p>\n
Mar'ie assured the House members he had instructed the
\ndirector general of tax to expedite the disbursement of tax
\nrefunds to eligible exporters without slackening the supervision
\nto prevent abuse of tax incentives by unscrupulous
\nbusinesspeople. But there is no reason to believe that this time
\nthe instruction will be effective. After all, businesspeople
\noften complain about similar bureaucratic hurdles they encounter
\nat other offices in getting the various incentives offered by the
\ngovernment to exporters. Officials in charge of administering the
\nincentives often are held hostage by their inordinate worries
\nabout possible abuse of incentives. True, not all businesspeople
\nare lily white and abuse is not impossible. This, however, should
\nnot prompt officials to hold up the granting of incentives to
\nmost exporters.<\/p>\n
In so far as tax incentives are concerned, exporters are
\nentitled to refunds of the value-added tax paid for the elements
\nused in the production of their export goods. This incentive is
\nadministered by the Directorate General of Tax. They are also
\nentitled to draw back the import duties and value-added tax paid
\nfor imported materials from the Export Service Facilitating
\nAgency under the finance ministry.<\/p>\n
We believe most exporters, especially those who rely largely
\non the international market, would not risk their reputations by
\nattempting to abuse the tax incentives. Moreover, the officials
\nor agencies in charge of administering the incentives should deal
\nregularly with exporters and should keep their track records
\n(compliance history). They should not harass all exporters simply
\nto catch several potential crooks.<\/p>\n
We therefore tend to agree with exporters' allegations that
\nthe main reason for officials to subject them to arduous checks
\nbefore granting them the incentives they are entitled to is not
\nreally to save government funds by preventing abuse, but to
\nextort illegal payments. This kind of malfeasance, which
\nbusinesspeople also encounter at licensing agencies, is obviously
\none of the major components of what analysts call Indonesia's
\nhigh-cost economy.<\/p>\n
In view of this bureaucratic behavior, we doubt there will be
\nany benefits -- in so far as export competitiveness is concerned
\n-- to come out of the industry and trade ministry's hard work in
\nselecting exporting companies that are eligible to the tax and
\nnontax incentives granted by the government to bolster exports.<\/p>\n
There are two things that are likely to occur if the
\nadministration of export incentives remains mired in malfeasance
\nor bureaucratic inertia. First, an increasing number of honest
\nexporters who are constantly under the inordinate suspicion of
\nofficials and who have to pay officials to get things expedited
\nmay eventually resort to infringements, thinking that they can
\nbribe their way out of official checks.<\/p>\n
Exporters who do not want to take the corrupt route may simply
\nabandon the export market and sell locally. Or if their licenses
\ndo not allow them to trade domestically, they may relocate their
\nplants to countries which offer better, more efficient and more
\ntransparent administration of export incentives. Either way would
\nhave a devastating impact on Indonesia's balance of payments
\nwhich already is under strong pressure from a huge, widening
\ncurrent account deficit.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/delayed-tax-refunds-1447893297",
"image": ""
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"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
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