Businessmen often neglect tax regulations

Businessmen often neglect tax regulations

JAKARTA (JP): Corporate managers in Indonesia tend to neglect
taxes in their decision-making processes, which, for their
companies, often results in losses in the end, a tax consultant
says.

"Based on experiences here, many companies manage their tax
payment on a crisis basis, meaning that managers may calculate a
business merely as being profitable but realize that the opposite
happens after taking taxes into account," said Jusuf Halim of the
Jusuf Halim & Rekan tax and management consultants.

Speaking at a business luncheon held by the Mercantile Club
yesterday, Jusuf said managers often disregard taxes in their
businesses due to a number of reasons.

The most typical, he cited, are little knowledge of Indonesian
tax laws and regulations on the part of corporate leaders; the
need to make "quick decisions" to grab business opportunities;
"one man show" management styles; the tendency to disregard tax
problems as something which can be "taken care of"; and
calculating taxes as a competitive disadvantage because of tax
evasions by competitor companies.

Neglect

Jusuf said neglecting tax regulations leads to inaccurate
investment, financing and operating decisions, which generally
result in a lower rate of returns and higher costs of capital.

For the sixth Five Year Development Plan (Repelita VI) period,
which started in April 1994, the government has targeted tax
revenues to reach 15.6 percent of the country's gross domestic
product (GDP) and 77.8 percent of domestic income.

In the previous Repelita V period, taxes accounted for 12.5
percent of the country's GDP and 64.5 percent of the domestic
income.

Jusuf said Indonesia currently has one of the lowest levels of
revenues from taxes in the world.

In 1989, the ratio of Indonesia's tax revenues to the GDP was
only 10.9 percent, compared to 12.4 percent in the Philippines,
23.2 percent in Malaysia, 18.2 percent in Singapore, 30.8 percent
in Britain and 24.6 percent in France.

Based on these figures, Jusuf said Indonesia still has much
room to increase tax revenues.

The low level of tax revenues, he acknowledged, could either
be caused by the low tax rates in the country or by a lack of
compliance on the part of tax-payers.

"But the condition has greatly improved over the last few
years and people have become more tax-conscious. Besides,
revenues from taxes don't necessarily have to be derived from
business profits, but, for instance, can also come from land fees
and value added tax," Jusuf said. (pwn)