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)