Businesses told to forgo tax breaks

Businesses told to forgo tax breaks

JAKARTA (JP): The tax revenue target set in the 1999/2000
state budget proposal can be obtained if industries don't ask for
tax breaks, according to a senior government official.

Director General of Tax Effendi Ritonga admitted that
achieving the Rp 74.31 trillion (US$9.91 billion) income tax and
value added tax target would be a "tough job", particularly amid
declining bank deposit interest rates and economic difficulties.

"But it doesn't mean we can't achieve the target... We'll
work hard, and I expect businessmen and companies not to ask for
tax-break facility," he told reporters after attending a
parliamentary hearing on the draft of the 1999/2000 state budget.

He added that getting the target revenue would also depend on
whether other goals of the budget could be met.

The draft budget expects income tax revenues to increase by
57.2 percent from Rp 26 trillion in the 1998/1999 budget, and
value added tax to increase by nearly 20 percent from 29 trillion
in the current financial year.

The draft budget assumes zero economic growth, an inflation
rate of 17 percent, and an exchange rate of Rp 7,500 to the U.S.
dollar. Some believe the assumptions are too optimistic,
particularly in these times of political uncertainty.

Economists have said that the income tax and value added tax
revenue targets cannot be obtained with the current anemic
condition of the business sector and declining bank deposit
interest rates.

The tax receipts for the 1998/1999 fiscal year are expected to
exceed the target, mainly due to the high interest rates
particularly in the second quarter of last year.

Many businessmen and industry associations have been lobbying
President B.J. Habibie to grant tax breaks to help them weather
the current economic storm.

The latest attempt came from Investment Minister Hamzah Haz,
who said in December last year that a Presidential Decree
spelling out the criteria for tax breaks for certain investments
would immediately be issued, and become effective in January
1999.

He explained that the tax break facility was needed to attract
foreign investment into the country, as it was faced with tight
competition from other crisis-hit nations in the region.

Approved foreign direct investment between January and Dec.
15, 1998, dropped by more than 60 percent, to $13.3 billion, from
$33.83 billion in the same period in 1997.

The tax office, however, hopes the tax facility is not
requested.

"This means that they will not pay taxes. This is a problem
(to obtaining the tax revenue target)," Effendi lamented. (rei)