Economists welcome tax ratio rise, warn of snags
Dadan Wijaksana, The Jakarta Post, Jakarta
Economists threw their weight behind the House of Representatives' approval of a government plan to raise the tax ratio to 13.03 percent in 2002 to help finance the cash-strapped state budget, but also warned of possible administrative glitches.
Bustanul Arifin of the Indonesian Development on Economy and Finance (Indef) said on Wednesday that the move was necessary as the country's tax ratio was still among the lowest in the region.
"It should be understood that the tax ratio increase does not necessarily mean people will have to pay higher taxes, but it means more people are obligated to pay taxes," Bustanul told The Jakarta Post.
"The move is a good step toward the bid to obtain more revenue from more taxpayers.
"Compared to other countries, our (tax) ratio is one of the lowest. There are too many Indonesians who do not pay taxes at present," he said.
Bustanul said that Thailand, the Philippines and Malaysia had all posted their tax ratios above 20 percent.
"The way I see it, 15 percent of the tax ratio is still realistic," Bustanul replied when asked what was the ideal rate for the country.
A tax ratio is the ratio between a country's tax income and its Gross Domestic Product (GDP).
The House state budget committee approved on Tuesday the government proposal to raise the 2002 tax ratio to 13.03 percent from the initial figure of 12.08 percent.
The prospect of a world economic slump has forced the government to revise the 2002 state budget draft, including widening the targeted deficit of the GDP to 2.7 percent from 2.5 percent.
Under the new tax plan, the number of taxpayers in 2002 is expected to reach 3.5 million, compared to this year's 1.9 million.
As for this year, the government is targeting to cash in some Rp 156.6 trillion (US$16 billion) in tax revenue, and Rp 184.7 trillion next year.
Raden Pardede, a senior economist at Danareksa Research Institute, also welcomed the tax ratio increase, but stressed that there should be no rise in the tax rate amid the current economic problems.
"As long as it intends to increase the number of taxpayers and not the tax rate, that's okay by me," Pardede said.
However, Pardede warned the government of possible mix-ups in paperwork as a significant rise in taxpayers requires a more efficient and professional administrative system.
"The government needs to gradually set up a more sufficient system because classifying so many taxpayers will not be easy."
He said he was referring to the government's estimate that there would be approximately 9 million taxpayers in 2004 if the tax ratio increase continues to take place every year.