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)