Batam tax office ignores House's 'law'

Batam tax office ignores House's 'law'

Fadli, The Jakarta Post, Batam

The House of Representatives might have won applause from the
proponents of free trade in the industrial island of Batam for
its bold move to unilaterally endorse a bill that will change the
island into a free trade zone (FTZ).

However, they are now facing the reality that the island's tax
officials are unwilling to implement the law.

Sumarno Salim, head of Batam's tax office, said on Wednesday
that his office rejected the "law" in line with the central
government's policy.

"Whatever the House says, finally, it's the government which
takes the action and Batam's tax office is an arm of the
government. The House may want free trade system be implemented
across Batam, but if the government rejects it, so what?" he told
The Jakarta Post.

While the government and the House were arguing whether to
implement free trade system across Batam, the government started
levying value added tax and luxury tax on several commodities
early this year in accordance with the Governmental Regulation
No. 63/2003.

Currently, the taxes are imposed on cigarettes, alcoholic
drinks, cars and electronic products.

This year, Batam's tax office targeted revenue from the taxes
at Rp 443 billion.

Sumarno said he was optimistic to reach the target, citing
that his office had thus far collected 40 percent of the target
revenue.

Located in the Malacca Straits, about one hour boat ride from
Singapore, Batam is one of the nation's prime industrial areas
that has attracted billions of dollars investment. The House
wants to apply a free trade system across the island, but the
government wants to apply the so-called "enclave FTZ" system,
under which only businesses operating in selected industrial
zones of the island are exempted from taxes.

Both parties proposed their own bills for the island but
failed to reach a compromise. Recently, the House made a
controversial move by passing its bill into "a law" despite the
government's rejection.

Under the nation's legal system, the Constitutional Court may
be asked by any parties to review any law, but Minister of
Justice and Human Rights Yusril Ihza Mahendra said the government
had no plans to file a petition with the court as it considered
the "law" endorsed by the House did meet the basic requirement
(the government's approval) to be called a law.

Johannes Kennedy Aritonang, chairman of Batam's Association of
Industrial Zone, said he hoped Susilo Bambang Yudhoyono, who is
set to become the nation's next president, would approve the
"law" that has been endorsed by the House.

"We once discussed with SBY about the matter in Bali. He then
promised to issue a pro-business policy," Johannes said, calling
Susilo by his popular address.

According to him, many foreign investors have decided to pull
out of the island once they knew the government would implement
an enclave FTZ system on the island rather than a common FTZ
system.

Sumarno, however, insisted that investment climate on the
island had by no means been affected by the government's plan to
apply the enclave FTZ system.