Businesspeople reject new tax amendments

Businesspeople reject new tax amendments

The Jakarta Post, Jakarta

Local businesses grouped in the Indonesian Chamber of Commerce
(Kadin) and representatives of foreign firms operating here have
rejected the proposed amendments to the tax legislation, arguing
they would hurt the economy more than benefit it.

"The amendments place too much power in the hands of tax
officials and excessively heavy sanctions on taxpayers, creating
a situation that could burden businesses and scare away
investment," Kadin chairman M.S. Hidayat said on Monday.

"We request that the deliberation and implementation of the
new legislation be put on hold, in the interests of our economy."

Hidayat explained that Kadin does not object to the
government's efforts to reform the country's taxation system, but
insisted that it should actually lead to a more equitable and
transparent system that supported the competitiveness of
Indonesia's businesses and its investment climate.

Kadin saw the proposed amendments as failing to do all of
these things, Hidayat said, referring to how unscrupulous tax
officials could still abuse their powers due to a lack of
effective sanctions, and how plans to reduce income tax rates to
between 25 percent and 30 percent would only come into effect in
2010, while the rates in other Asian countries were already lower
than these.

"The requirement to state expenditure in annual tax returns
will only create an administrative nightmare for businesses, as
well," he said.

National Economic Recovery Committee (KPEN) chairman Sofyan
Wanandi highlighted how several draconian aspects of the draft
amendments -- such as direct jail terms and the freezing of bank
accounts following on from simple negligence or mistakes in
submitting tax data -- could discourage businesses.

"Businesses will surely stop dead in their tracks if their
bank accounts are frozen over tax problems," he said.

The government has submitted to the House of Representatives
its proposed amendments to Law No. 16/2000 on general taxation
arrangements and procedures, Law No. 18/2000 on VAT and luxury
tax and Law No. 17/2000 on income tax.

Kadin had actually been involved in the drafting of the
amendments, together with the tax office, and had supported the
amendments, as many of its pro-business suggestions appeared to
have been accommodated. The tax office, however, later made
changes to the amendments to the dismay of Kadin.

Now that the draft amendments had been submitted to the House,
Hidayat -- himself a lawmaker -- said the business community
would do its best to lobby legislators to amend the amendments.

Vice chairman of the Jakarta-Japan Club Foundation's taxation
committee, Hiroo Koshino, and the chairman of the International
Business Chamber (IBC)'s tax committee, Phillip J. Shah, agreed,
saying tax reforms should stress legal certainty, greater
equality as between tax officials and taxpayers, and a tax system
based on high moral standards.

"A tax system can be said to be successful if it is fair,
simple, certain and competitive," Shah said.

Vice chairman of the Indonesia-Australia Business Council,
Peter G. Fanning, said that the draft amendments to the tax
legislation could lead to existing investors reducing their
commitments and new investors staying away.