Abdurrahman agrees to drop VAT plan for agri-products

JAKARTA (JP): President Abdurrahman Wahid has agreed to drop a plan to impose a value added tax on agricultural products, according to Minister of Agriculture Bungaran Saragih.

Bungaran said on Thursday the proposed value added tax would have caused the products of local farmers to be less competitive on the market.

"The President has agreed that the value added tax (on agricultural products) will not be imposed," he said following a meeting with Abdurrahman at the Bina Graha presidential office.

"We must help our farmers ... so that our agriculture sector can develop and compete with the agriculture sectors overseas," he said.

The Ministry of Finance earlier planned to impose a 10 percent value added tax on agricultural products as part of a broad effort to boost the revenue of the cash-strapped government in financing its various economic reform programs.

Bungaran dismissed the suggestion that scrapping the value added tax on agricultural products would prevent the government from meeting its 2001 tax target, pointing out that even last year's tax revenue surpassed the government's target.

The government plans to raise about Rp 179.89 trillion in tax revenue in the current budget year, of which some Rp 48.85 trillion is expected to come from value added taxes.

According to reports, local rice farmers have been faced with low prices for their products at the start of the current harvest.

The current market price for dried unhusked rice has dropped to below the minimum Rp 1,500 per kilogram price level set by the government.

The price dropped because the harvest started earlier than expected, according to reports.(rei)