Clear-cut rules on tax facilities for pension funds called for

Clear-cut rules on tax facilities for pension funds called for

JAKARTA (JP): Executives of pension funds and tax consultants
want the government to issue a clear-cut regulation on procedures
for tax exemption given to pension funds.

Achmad Hadibroto, a tax consultant at Hans Tuanakotta &
Mustofa public accounting firm, said yesterday that the
government's present policy on tax facilities for pension funds
is not only confusing but also ineffective.

Speaking at a seminar on the implementation of the new pension
fund laws, Hadibroto said that many pension funds have yet to
benefit from the income tax exemption due to different
perceptions about the government's tax rulings.

Hadibroto said that pension funds are exempt from income tax
for their investments in time deposits in local banks, bonds,
shares and commercial papers traded on domestic markets.

However, the tax regulation is not smoothly implemented as
pension funds have to obtain a letter from the Ministry of
Finance certifying that their investments in securities or time
deposits are exempted from income tax, he said.

"The problem is that we often face difficulties in obtaining
such a letter," Hadibroto said.

Ambiguity

Executives of a number of pension funds also expressed their
concern about the ambiguous tax regulation, especially that
regarding the income tax exemption on time deposits and
securities.

An executive of a foreign joint venture pension fund also
complained about the government's different treatment on pension
funds' investments on securities traded on foreign capital
markets and time deposits in overseas banks.

"I think income from securities traded on foreign capital
markets and time deposits in overseas banks should get similar
treatment as a number of Indonesian companies are already listed
on foreign capital markets," he said.

Kadarisman, the chairman of the Association of Indonesian
Pension Funds, said that the ambiguous income tax regulation does
not only concern securities but also other business activities.
He even charged the government of imposing double taxation.

"We support the idea that all activities that can generate
income is taxable," he said in reference to the government's
regulation that business activities of pension funds creating
economic value are subject to income tax.

Kadarisman, however, said that the regulation does not really
reflect fairness because, unlike those of business entities,
gains resulting from pension funds' business activities are not
immediately enjoyed by their members.

The income tax exemption should not, therefore, be limited
only to securities trading or bank deposits but to all pension
funds' investment activities to avoid double taxation, he said.

Kadarisman said the government imposes double income tax on
pension funds because they have to pay income tax not only during
the investment process (outside bank deposit and securities) but
also when pension fund members receive their pension benefits.

At least 190 pension funds operate in the country with total
assets of around Rp 9 trillion (US$.28 million).(hen)