Government to go after taxpayers to boost income

Government to go after taxpayers to boost income

The Jakarta Post, Jakarta

President Susilo Bambang Yudhoyono told the tax office on
Wednesday to boost tax revenue up to 19 percent of the nation's
gross domestic product (GDP) by 2009, from 13.8 percent at the
moment.

However, Ministry of Finance Director General for Taxation
Hadi Purnomo, speaking to reporters following a visit by the
President to the tax office's headquarters, said Susilo had
stated that such a move should not come at the expense of
economic growth.

"That means we should focus more on enlarging the tax base,
rather than on the tariffs.

"So, in 2009, it should become 19 percent -- not by raising
tax rates, but by widening the tax base," Hadi said after the
visit, in which Coordinating Minister for the Economy Aburizal
Bakrie and Minister of Finance Yusuf Anwar accompanied the
President.

Tax revenue, targeted this year to reach Rp 238 trillion (some
US$26 billion), accounts for about 80 percent of the total state
income. The tax revenue target in the 2005 state budget stands at
Rp 297.51 trillion. Tax has now become a crucial source of
revenue for the state budget in a bid to end dependency on
foreign loans and to create a more sustainable fiscal condition.

Despite the fact that there is only about 2.5 million
taxpayers out of the country's 220 million population, Hadi is
optimistic that the office can still meet the high target, which
should require an increase of about a 1 percentage point in tax
ratio per year.

Asked about his plans to increase the number of taxpayers,
Hadi replied that, aside from developing the so-named single
identification number for citizens, his office is also pursuing
greater access to information of financial transactions in banks
and other financial institutions to detect potential sources of
taxpayers.

But, the later is very unlikely to be adopted in the near
future amid strong objections, particularly from bankers, citing
the importance of the banking confidentiality to maintain
confidence in the banking sector.

Susilo's remarks that any move to increase tax revenue should
not put at risk the nation's industry and economic growth
corresponds with the banker's objections.

Analyst Aviliani of the Institute for Development of Economics
and Finance (Indef) cited two things, in addition to increasing
the number of taxpayers, that could boost tax revenue.

First, improving transparency and efficiency of the tax
office, she said, which would in turn cut bureaucratic red-tape.

"This would be beneficial in limiting chances for potential
losses," she said.

Citing various studies, the tax office, despite its
contribution to state coffers, has also been used as a cash cow
by unscrupulous officials seeking personal gain.

Second, Aviliani said, by introducing more tax incentives for
industries, especially export-oriented ones.

While in the short term, the move would hurt tax revenue, but
it would be beneficial in the long run, as companies should
benefit from lower production costs and in the end boost their
revenue.

Larger revenue means another potential source of tax revenue,
she added.