Soeharto wants all local levies stopped<\/p>\n
JAKARTA (JP): President Soeharto ordered Minister of Home
\nAffairs R. Hartono yesterday to ensure that all business levies
\nimposed by provincial, regency and city administrations be
\nabolished immediately.<\/p>\n
Hartono, speaking to the media after meeting with the
\nPresident at the Bina Graha presidential office, said teams from
\nthe ministry would be sent to the regions periodically to ensure
\ncompliance.<\/p>\n
An end to all business levies at local government levels is
\none of several pledges by the government in its latest economic
\nreform package, drawn up with the International Monetary Fund and
\nannounced last week.<\/p>\n
The Ministry of Home Affairs is empowered to take punitive
\naction against delinquent administrations, Hartono said. He did
\nnot elaborate on the sanctions.<\/p>\n
Levies, legitimate and otherwise, have been a major source of
\ncomplaints for many businesses, as they increased business
\nexpenses and undermined overall competitiveness.<\/p>\n
The central government frequently promised to reduce the
\nnumber of levies, but its efforts were met strong bureaucratic
\nresistance. Many local administrations have relied on levies to
\nbolster their revenues.<\/p>\n
Hartono said local administrations would soon be allowed to
\nimpose a 5 percent local tax on sales of gasoline to replace the
\nlevies.<\/p>\n
They should also collect more income from the higher tax rates
\non the transfer of property titles beginning April 1. All
\nproperty tax revenues would also be retained by the local
\nadministration beginning this fiscal year.<\/p>\n
The government has yet to announce when the new 5 percent
\ngasoline tax, originally scheduled for April 1, will take effect.<\/p>\n
Hartono conceded the end to the business levies would mean
\nlower revenues for local administrations.<\/p>\n
The move has already forced many local administrations to
\nslash their budget plans for this year.<\/p>\n
The Jakarta city administration announced yesterday it was
\nscaling down its spending in this fiscal year by a further 35
\npercent, from Rp 2.8 trillion to Rp 1.8 trillion.<\/p>\n
The regency office in Dili, the capital of East Timor, said
\nmany city administrations could not operate if they were to rely
\nsolely on locally generated tax revenues and central government
\nsubsidies.<\/p>\n
Anthonio Castro, the regency's director of local companies,
\nsaid the abolition of business levies would be particularly tough
\nfor administrations in poor provinces like East Timor and East
\nNusa Tenggara, Antara reported.<\/p>\n
Richer provinces like Bali and those in Sumatra and Kalimantan
\nwould experience few effects, he said.<\/p>\n
Castro warned that local administrations would become even
\nmore dependent on central government subsidies to finance their
\ndevelopment programs. (byg)<\/p>",
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