1997/98 budget too conservative, says economist

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)