Government delays tax on land, buildings purchase

Government delays tax on land, buildings purchase

JAKARTA (JP): The government issued two rulings on taxes and
one circular letter on assets reevaluation from the director
general of tax yesterday.

The Directorate General of Tax said in a statement yesterday
that Government Regulation No. 1/1997, dated Dec. 31, had
postponed the implementation of the tax law on the purchase of
land and buildings from the original date of Jan. 1, 1998, to
June 30, 1998.

The regulation's explanation said the current monetary turmoil
had greatly burdened the people, and therefore, the government
felt it necessary to postpone the enforcement of the new tax law,
which could add to the people's burden.

"A new burden like that would add to the cost of the economy,
which in this difficult situation could limit the creation of
jobs and even reduce existing employment opportunities, which are
important to people's welfare," the statement said.

Law No. 21/1997 on the sales tax on property and buildings, if
implemented, would require anyone purchasing property worth more
than Rp 30 million (US$5,000) to pay a 5 percent tax to the
government.

The Indonesian Association of Real Estate Developers proposed
to the government last year to postpone the implementation of the
new law as it could punish the property sector.

The government regulation, however, stipulated that the law
would be implemented in the second half of this year, hoping the
economy would recover.

Director General of Tax Fuad Bawazier said the delay in
implementing the new property tax would not affect tax revenue
for 1998/1999 as the government had anticipated the postponement.

The government has also issued Government Regulation No.
48/1997 which raises the tax rates of land and buildings for
plantation firms and forest concessionaires.

According to the new regulation, a plantation firm having more
than 25 hectares of plantations has to pay an annual property tax
at a rate of 0.2 percent of the property's taxable value -- a 100
percent increase from the previous tax rate of 0.1 percent.

Taxable forestry assets owned by forest concessionaires or
firms licensed to cut or use logs are subject to a 0.2 percent
tax also.

Luxury homes worth more than Rp 1 billion are subject to a 0.2
percent building tax, except those owned by civil servants,
members of the Armed Forces and pensioners whose incomes mainly
come from their meager salaries or pension allowances.

Fuad said the increase in tax rates for plantation and
forestry firms would add to the government's tax revenue next
fiscal year.

Speaking on his circular letter on assets reevaluation, Fuad
said he encouraged companies suffering great losses due to the
sharp depreciation of the rupiah against the U.S. dollar to
reevaluate their fixed assets to prevent deepening losses.

Whenever assets reevaluations resulted in profits, then the
profits would be subject to a 10 percent income tax. But if
companies did not profit, the 10 percent income tax would not be
applied. (rid)