1997/98 budget too conservative, says economist

JAKARTA (JP): The revenue target in the draft 1997/1998 state budget is too conservative because the government has many ways to increase its revenue, a noted economist said yesterday.

Rizal Ramli, the director of Econit Advisory Group, said, "Actually, the government's revenue target can still be increased because the 12.9 percent rise envisaged in value added tax receipts seems too low."

He was speaking to reporters on the draft state budget unveiled by President Soeharto on Monday.

He said that oil prices on the world market were predicted to average US$17.5 a barrel this year, while the government had projected oil tax receipts on the basis of an average oil price of $16.50.

Director General of Taxes Fuad Bawazier has confirmed that the government would not introduce additional tax measures which would burden the public, despite the 16 percent targeted increase in tax receipts to Rp 64 trillion ($27.6 billion) for the 1997/1998 fiscal year.

Rizal said there were still many ways to increase government revenue without additionally taxing the middle and lower classes more.

Rizal said there were three ways by which the government could increase its revenue: by finding more innovative ways to raise revenue; by rearranging spending priorities to give more funding to productive activities; and by maximizing the implementation of the fiscal policy in tackling macroeconomic problems.

Citing an example, he said the government could increase its royalties and licensing fees on the exploitation of natural resources in forestry, mining, fisheries and other industries.

He said decreased revenue from the exploitation of natural resources was caused by a lack of legal certainty.

Another innovative way to raise revenue was to differentiate the rate of individual income taxes from corporate income tax rates, he said.

Tony Prasetiantono, an economist at the University of Gajah Mada in Yogyakarta, said the very conservative budget reflected the government's caution to avoid an economic blowout.

He said the draft state budget reflected the government's great self-confidence because it prioritized the stability of national development over the short-term objective of pleasing voters.

"Ahead of the general election in May, many analysts predicted that the 1997/1998 state budget would be very expansive. But it only increased by 11.6 percent. This reflects a very strong self-confidence because the government does not feel any pressure of having to please the electorate to gain a majority win," he was quoted by Antara as saying in Yogyakarta.

He said the state budget would stand as a guarantee of stability for businesspeople, particularly foreign investors.

A.R. Karseno, another economist at the University of Gajah Mada, said the government should not be complacent about development achievements.

"We should look at the economic progress in other countries which are our competitors," he said.

He said that compared with most other ASEAN countries such as Malaysia, Singapore and Thailand, Indonesia lagged behind in terms of attracting foreign investment.

PT Bukaka Teknik Utama's president, Fadel Muhammad, said the draft state budget was very pleasing for common people because it would spur regional economic growth.

He said it contained several projects, under presidential decrees, which aimed to reduce disparity between the rich and the poor. (bnt)