Realigning local taxes<\/p>\n
Many officials will lose significant sources of personal,
\nthough illegal, incomes when the bill on local taxes and
\nretributions (user tax and user fees) comes into force sometime
\nnext year. But the new legislation will surely contribute to
\nstrengthening the fiscal system of local administrations, notably
\nthe subnational government at the regency level, which has been
\ndesigned to function as the bastion of local administrative
\nautonomy.<\/p>\n
The bill will realign and redefine the kinds of taxes and
\nretributions that can be collected by local administrations at
\nthe provincial and regency levels. It was one of the four bills
\non tax matters which were submitted to the House of
\nRepresentatives last week.<\/p>\n
A cursory reading of the draft legislation might lead to the
\nconclusion that local administrations would lose a large amount
\nof income because the bill will abolish many local taxes and
\nretributions. That, however, will not be the case. True, a large
\nnumber of taxes and fees currently imposed by local
\nadministrations will be abolished. But, as Director General of
\nTaxes Fuad Bawazier has often acknowledged, quite a number of the
\nlocal taxes have so far served more as illegal sources of
\npersonal income for officials. The potential revenue from many
\ncategories of the taxes have been so insignificant that the
\nauthority to collect them has often been abused by officials to
\nline their own pockets.<\/p>\n
Moreover, as businessmen in the provinces have often
\ncomplained, the legal basis and economic rationale for the
\ncollection of local taxes or user fees is often questionable.
\nLocal taxes are supposed to be mandated by local legislation
\nenacted by the regency or provincial legislature. In reality,
\nthough, numerous kinds of local taxes or user taxes and fees have
\nmushroomed and many of them have been mandated simply by decrees
\nof a regent or governor. No wonder investors have been
\ncomplaining a lot about the invisible costs of doing business in
\nthe country.<\/p>\n
The bill will realign all those local taxes and levies,
\nmeaning that their number will be slashed. But the bottom line
\nwill still be a larger income for local administrations, because
\nthe smaller number of taxes will be imposed on the economic
\nsectors with the biggest potential to generate revenue.<\/p>\n
Provincial administrations will be empowered to collect only
\nthree kinds of taxes: tax on motor vehicles, tax on the transfer
\nof motor vehicle ownership and tax on gasoline. The latter will
\nbe a completely new tax to be imposed on gasoline sales. Regency
\nadministrations will be authorized to collect only six kinds of
\ntaxes: taxes on hotels and restaurants, entertainment services,
\nadvertisements, street lighting, quarried minerals and ground
\nwater.<\/p>\n
Another bill concerning tax on the transfer of land and
\nbuilding ownership, which was also unveiled to the House last
\nweek, will become another major source of income for local
\nadministrations. Unlike the tax on land and buildings, which is
\ncollected annually, the new one will be collected on the basis of
\ntransactions.<\/p>\n
There are, we think, several other benefits from the new
\nbills, in addition to the generation of larger tax receipts to
\nlocal administrations. The new legislation will give a stronger
\nlegal certainty to the taxpayers, because the objects of taxes
\nare clearly defined and the rates are clearly set. The central
\ngovernment, apparently with a view toward providing a broader
\nleeway for local creativity and initiatives, does not set fixed
\nrates for the local taxes, but sets only the maximum rate for
\neach of the nine local taxes.<\/p>\n
But the most significant impact with regard to the development
\nof local administrative autonomy will be the big stimulus for
\nlocal administrations to take more initiatives toward bolstering
\neconomic activities in their respective areas. Since the full
\nincome potentials of the six local taxes can only be realized
\nunder robust economic expansion, local administrations will be
\nencouraged to be more aggressive in promoting investments and
\nmore friendly in treating businesses in their respective areas.<\/p>",
"url": "https:\/\/jawawa.id\/newsitem\/realigning-local-taxes-1447893297",
"image": ""
},
"sponsor": "Okusi Associates",
"sponsor_url": "https:\/\/okusiassociates.com"
}