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)