Government issues 41 new decrees on tax and regional autonomy

JAKARTA (JP): The Finance Ministry said on Monday that it had issued 41 new decrees, including 38 new tax and excise decrees, in a bid to meet the government's 2001 state budget revenue targets and to support the decentralization program.

The statement, issued by the Finance Ministry, provided few specifics regarding the content of the new decrees.

However, it did outline that the 37 new decrees concerned changes relating to new tax cuts, tax facilities, excise on alcoholic beverages and a luxury sales tax on cars.

The statement specified several decrees aimed at boosting investment activities. They concern the reduction of income taxes on bond revenues at stock exchanges, income taxes on construction services, and the provision of tax facilities to tax payers investing in certain businesses or regions.

Another decree requires the government to pay interest rates to tax payers on the excess of their obligatory tax payments if the directorate general of tax fails to return the excess amount or fails to issue notification of the excess amount on time.

"The interest rate (for the excess tax amount) is set at 2 percent a month and will take into account tax debts first," the statement said.

Some of the decrees regulate the writing of financial reports in foreign languages and the use of currencies other than rupiah, the statement said.

Under the new decree on luxury taxes the government will include the imposition of a 75 percent luxury tax rate for cars with engine capacities of more than 4,000 cubic centimeters (cc), and a 50 percent luxury tax on cars with engine capacities of between 3,000 to 4,000 cc.

A new decree relating to the excise tax on alcoholic beverages outlines that the government will increase the levy in phases, the ministry said.

For instance, excise taxes on locally made and imported beverages containing up to 1 percent of alcohol will be raised up to Rp 1,250 per liter.

Excise taxes on locally-made and imported beverages, containing between 1 and 5 percent of alcohol, will be raised to Rp 2,050 and Rp 2,500 per liter respectively.

Among the new decrees are those concerning revenue sharing between the central and regional governments, as stipulated by the Intergovernmental Fiscal Balance Law No. 25/1999, which was implemented on Jan. 1 this year as part the decentralization program.

The ministry, however, did not provide details of the decree.

Under the Intergovernmental Fiscal Balance Law, the government has to give local governments a greater share in the revenue from the exploitation of natural resources in the regions.

With a shrinking revenue base, the government is facing a tough challenge to meet this year's tax revenue target of Rp 154.2 trillion (about US$16.2 billion).

The government has already come under fire for issuing two regulations last month, hiking the tax rate on interest received from bank term deposits, as well as imposing value added taxes on agricultural and animal husbandry products.

Under the new tax policies the government increased tax rates on interest earned from bank term deposits to 20 percent from 15 percent, and imposed a 10 percent value added tax on agricultural and animal husbandry products. Both regulations have been in effect since Jan. 1.

It is unclear whether the two new regulations were part of the 41 decrees the Finance Ministry has issued.

Finance Minister Prijadi Praptosuhardjo said he would look into various public objections against the new tax policies before deciding whether to review them.

"We don't know yet whether we must delay (the policy). First we'll have to look at all the inputs," Prijadi told reporters after a post-Idul Fitri gathering on Monday. (bkm)