Government budget plan gets cautious welcome<\/p>\n
JAKARTA (JP): Economists and members of the House of
\nRepresentatives (DPR) describe the 1995-96 state budget draft as
\nrealistic but are warning the government to take stronger
\nmeasures to curb the widening current account deficit and
\nmounting inflationary pressures.<\/p>\n
Aberson Marle Sihaloho of the Indonesian Democratic Party
\n(PDI) said yesterday that the lower projection in state revenues
\nfrom domestic sources reflects the real situation of the
\ncountry's economy.<\/p>\n
\"It indicates that we are getting more reliant on the private
\nsector,\" he said in regards to the 1995-96 budget draft.<\/p>\n
Aberson, the deputy chairman of the House's Budgetary Commission,
\nsaid that the lower growth in income tax revenues would not affect
\nthe overall tax revenue target, as the government is expected to
\nbring in more revenues from other tax sectors.<\/p>\n
President Soeharto unveiled the budget draft for the 1995-96
\nfiscal year yesterday, with revenues and spending expected to
\nbalance at Rp 78.02 trillion (US$36.28 billion), a nominal increase
\nof 11.9 percent over the 1994-95 budget.<\/p>\n
State revenues from oil and gas taxes in 1995-96 are projected to
\nincrease by 3.3 percent to Rp 13.27 trillion, after declining 15
\npercent in the 1994-95 fiscal year. Revenues from non-oil taxes are
\nexpected to surge by approximately 12.2 percent to Rp 52.98
\ntrillion while foreign assistance levels are expected to soar 17.4
\npercent to Rp 11.75 trillion.<\/p>\n
Hamzah Haz, from the Moslem-dominated United Development Party
\n(PPP) and member of the Budgetary Commission, said that he was
\noptimistic that the projected increase in Value Added Tax (VAT)
\nreceipts could be reached.<\/p>\n
He asked the government, however, to delay any plans to increase
\ntelephone and electricity tariffs in a bid to compensate for the
\nincreased VAT burden that consumers will face in the next year
\nunder the government's new tax laws.<\/p>\n
Government VAT revenues are projected to increase by 25.8 percent
\nto Rp 16.65 trillion, second only to income tax revenues, which are
\nprojected to grow approximately 2.1 percent to Rp 19.23 trillion.<\/p>\n
Too small<\/p>\n
Hadi Soesastro, an economist at the Centre for Strategic and
\nInternational Studies (CSIS), said that the government's projection
\nof a 12.2 percent increase in non-oil tax receipts is too small,
\ngiven the country's high tax potential.<\/p>\n
The ratio of tax receipts to Indonesia's Gross Domestic Products
\n(GDP) is only around 11 percent, much lower than the Philippines
\nand their 16 percent ratio, he said, indicating that the government
\ncould expand the tax coverage much further.<\/p>\n
In terms of the export tax, Fadel Muhammad, an executive of the
\nChamber of Commerce and Industry (Kadin), questioned the
\ngovernment's dramatically increased figure in this area.<\/p>\n
\"I am really surprised about the rise in the government's export
\ntax projection,\" he said, adding that the rise in the income from
\nexport taxes will consequently hurt export-oriented companies.<\/p>\n
\"I hope the rise in the export tax target does not set back the
\ngovernment's policy of fair trade,\" he said.<\/p>\n
Government's officials said that the 170 percent rise in export
\ntax receipts to Rp 44.4 billion will not be caused by an expansion
\nof export tax coverage but mainly by greater export tax revenues
\ncollected from crude palm oil (CPO).<\/p>\n
Widening deficit<\/p>\n
House members and economists harbored strong reservations about
\nthe country's widening current account deficits in light of
\ninflationary pressures which are expected to be stronger in 1995-
\n96.<\/p>\n
Hamzah said that sharp growth in imported capital goods,
\nresulting from increased investments, could hurt the country's
\nbalance of payments considerably if no appropriate measures are
\ntaken to increase non-oil exports.<\/p>\n
The proposed salary increase for civil servants and industrial
\nworkers would push up consumer demand, thereby resulting in
\nstronger inflationary pressure, he said.<\/p>\n
An increase in both inflationary levels and the current account
\ndeficit, according to Hamzah, could become very sensitive issues in
\nthe country's monetary system if they are not carefully handled<\/p>\n
Last year's inflation rate reached 9.24 percent, declining
\nslightly from 9.77 percent in 1993. The current account deficit is
\nestimated to grow to 4.09 billion in 1995-96, up from last fiscal
\nyear's level of $3.56 billion and the 1993-94 level of $2.94
\nbillion.<\/p>\n
Hadi said that the country's balance of payments prospects are
\npromising due to higher growth predicted in the world economy. In
\naddition, the surplus in the balance of payments is expected to
\nincrease from $1.01 billion in 1994-95 to $1.8 billion in 1995-96.<\/p>\n
\"Inflation will also be manageable,\" he said, estimating that the
\ninflation rate will be checked at nine percent in the 1995-96
\nfiscal year, even with six to seven percent growth expected in the
\ncountry's economy.(rid\/hdj\/hen)<\/p>",
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