City Council set to endorse new by-law on fuel tax

City Council set to endorse new by-law on fuel tax

JAKARTA (JP): City Council is preparing to sign a new by-law
ratifying the city administration's plan to collect a 5 percent
tax from state oil and gas firm Pertamina on sales of automotive
diesel and fuel in the capital.

"We'll sign Monday the 1998 City By-law No. 6 on Fuel Tax,"
head of the United Development Party faction Ahmad Suaidy told
reporters yesterday.

Councilors hailed the administration's plan, which was
announced Tuesday by deputy governor for economic and financial
affairs Harun Al Rasyid.

Councilors argued earnings from the proposed fuel tax would
help the administration boost its locally generated revenue,
projected to plummet this fiscal year due to the crisis.

"The amount of earnings to be collected from the fuel tax is
estimated to reach about Rp 200 billion to be contributed for the
ongoing 1998/99 fiscal year, which would be very helpful for the
administration," said head of Commission C for finance and
revenue affairs Amarullah Asbah.

On Tuesday, Harun said the city administration discussed the
plan with Pertamina, the Ministry of Home Affairs and the
Ministry of Finance recently.

"Hopefully, we'll be able to collect the fuel tax from
Pertamina starting with sales this month," Harun said.

The administration, he added, hoped the procedure for tax
collection from Pertamina would not be difficult.

"There's an ongoing discussion on that."

Councilors were also happy with the plan because the 5 percent
tax will not be added on to existing prices.

But Harun's projection on the tax's contribution to the
administration's revenue was far less than Amarullah's.

He estimated it would contribute only between Rp 50 billion
and Rp 70 billion for the current fiscal year but he did not
explain his calculation.

Burdening

Pertamina president Soegianto recently lamented the company's
burden of unpaid debts from clients, including about Rp 12.1
trillion due to be paid by the government to reimburse
Pertamina's fuel subsidies.

For the administration, the fuel tax will be a welcome
contribution to its bare-bones Rp 1.3 trillion budget.

"Well, now that we can get new income to be added to our tight
revenue, the administration can breathe again," Harun said.

It may prove to be a lucrative income source to compensate for
the plunge in the city's revenues following the implementation of
1997 Law No. 18, which slashed tax earnings to nine categories
from 42 and levies to 30 from 192.

Harun said the administration was also looking into other
possible tax income, such as that on land transactions.

"This tax requires the parties who sell and buy the land to
each pay to the administration 5 percent of the total transaction
value."

Harun estimated taxation on land sales could contribute at
least Rp 70 billion a year to the administration's revenue. (cst)