Economists hail campaign against levies

Economists hail campaign against levies

JAKARTA (JP): Economists hailed the government's plan to
further cut legal levies but also suggested that it fight against
illegal "levies" to help boost Indonesia's economic
competitiveness.

I Nyoman Moena, chairman of the Supervisory Board of the Local
Private Banks Association, said on Saturday that the government
was heading in the right direction by taking steps to eliminate
levies which have no direct consequence on output.

However, Moena emphasized that the aim of this initiative
would not be met if the government neglected the fight against
corruption, which burdens businesses more than legal levies.

"On top of the legal levies, you have bribery and corruption;
This can be found on roads, in offices or banks. And they
irritate businesses more than the legal ones," Moena told The
Jakarta Post.

He made the remarks after President Soeharto made a second
call on the local administrations last Friday to revoke all
rulings on levies which hamper economic growth. Soeharto warned
that he would issue a presidential decree to enforce the
reductions if moves were too slow.

"I totally agree with such a presidential decree as long as it
is issued to slash levies not directly related to production and
distribution," Moena said.

He suggested that the government maintain "important" levies
such as those introduced to protect the environment, protect
consumers, improve human resources development and raise local
revenues.

Concurring with Moena's view, economist Mari E. Pangestu
suggested that the government revoke obsolete or unclear levies
and maintain necessary ones only.

"Don't eliminate levies for the sake of elimination only. Some
levies exist for certain reasons," Mari told the Post on
Saturday.

Mari, an executive at the Center for Strategic and
International Studies, said local administrations often issue
rules which require levies on certain business activities or
commodity trading in order to collect the greatest possible
revenues from local economic activities.

While apparently sympathetic to administrations' need to raise
funds, Mari said that many of such official levies become
burdensome to the businesses as they are often followed by
unofficial levies.

"It is necessary to find the balance so that local
administrations can raise funds without creating a high cost
economy," Mari said.

According to some critics, the amount of funds levied locally
on various goods is significant enough that it is causing market
distortions and a high-cost economy.

Mari suggested that existing regulations on levies be made
clear in themselves and, if necessary, completed with necessary
explanations. Therefore, there will be no loopholes for officials
to misinterpret and use them for their own end, and business
people will know exactly what to do and how much they have to pay
to comply with the regulations.

She noted that different interpretations of regulations on
levies are an impediment to trade and investment in Indonesia as
they create uncertainty in doing businesses here.

In fighting against corruption, Moena suggested that the
government overhaul its administrative infrastructure so that
corruption among officials and collusion between officials and
business people can be minimized.

He said that making such fundamental changes in a system would
require a comprehensive study. He suggested that the office of
the state minister of administrative reforms carry out such a
study. (rid)