Sat, 04 Jun 1994

DPR urges government to deliver four bills on tax reform soon

JAKARTA (JP): The government, which wants to revise the country's tax system to increase revenues, was challenged yesterday by the House of Representatives (DPR) to deliver four bills on taxes by the end of this year.

A vice chairman of the House's Commission VII, Moeharsono Kartodirdjo, said in a hearing with Director General of Taxation Fuad Bawazier yesterday that the government should deliver bills on a value added tax (VAT), sales tax, income tax and land and building tax (property tax) by December.

"The sooner the better," Moeharsono said.

Bawazier, however, replied to members of the commission, which deals with finance, trade and logistics, that he is afraid this will not be possible because draft-bills must first be submitted to his superior, the Minister of Finance.

He added that the minister himself will hand over the bills to the State Secretariat, which will seek approval from the President before submitting them to the House. "It is the standard procedure," he said.

Minister of Finance Mar'ie Muhammad said recently that tax reform, which will expand allowable withholding and offer more transparency and fairness, will be proposed to the House in the current fiscal year.

According to the minister, himself a former director general of taxation, the current ten year old tax law is no longer relevant to the present state of the economy.

Citing an example, Bawazier said yesterday that business transactions, both financially and legally, have become more complicated.

"We now have build-operate-transfer transactions, buy-and-rent transactions, grants and many others," he said, adding that the existing tax laws are inadequate in the face the changes.

He said he has set up a team of experts to draft the four bills. "The team is still studying legal and administrative aspects of the bills," he noted.


Meanwhile, a commission member, Andi Hasan Machmud said at yesterday's meeting that corruption and collusion between businessmen and tax officials has hampered the growth of tax revenue.

"The government's tax revenues would be 25 percent higher if tax officials were disciplined," he said.

The government, under its budget plan, expects a 20.4 percent increase in tax revenues to slightly over Rp 34 trillion (US$15.7 billion) this fiscal year from Rp 28.24 trillion budgeted for last fiscal year.

Machmud said that many tax officials are corrupt and help business people avoid full payment of taxes.

The Directorate General of Taxation should impose "shock- therapy' to eliminate such bad habits, he said.

"Fire some five or ten corrupt officials and announce their names publicly. It will frighten the others," he told Bawazier, adding that Bawazier should not think esprit de corps precludes this approach.

The commission also urged Bawazier to tax social foundations which exist not to do charitable works but to help private business evade taxes.

Moeharsono pointed out that some foundations, which deal with education and health, make big profits paying a single rupiah in taxes.

Bawazier said his office has already taken taxes from certain foundations, including those running the first class hospitals on Jl. H.R. Rasuna Said and Pondok Indah, both in South Jakarta.

He said the hospitals pay 100 percent of their property taxes, as compared to the 50 percent paid by most other hospitals.(09)