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)