Government to introduce excise tax on tires, cement, soft drinks

JAKARTA (JP): The government is set to introduce an excise tax on cement, tires and soft drinks in April in a bid to raise about Rp 2 trillion (about US$275.8 million) to help finance the April- December 2000 state budget.

Director General of Customs and Excise Permana Agung said on Tuesday his office was finalizing the plan.

"We plan to introduce an excise tax on three items, that is, cement, tires and soft drinks," he told House of Representatives Commission IX on the state budget and banking.

The government is under pressure to secure domestic sources to finance the 2000 state budget, estimated to be about Rp 183.07 trillion.

Tax revenue in the budget year that starts in April is expected to reach Rp 97.8 trillion.

Permana said that his office would be "extra careful" in introducing the new tax.

He said that cement used for building facilities which were of public benefit, including low-cost houses, would be exempted from the new tax.

Tires used for public transportation would also be exempted.

"We have discussed the plans with the related ministries, particularly the Ministry of Trade and Industry, which don't seem to have any objection."

Permana acknowledged the respective industries objected to the new policy.

"We are sending our team once more to each industry to check whether it's the right time now to launch the new policy."

He said businesses objected because the excise tax would cause price increases, which could lead to significant slowdowns in sales, and eventually layoffs.

Cement, tires and soft drinks are among the handful of industries which have registered a surge in consumer demand since the economic crisis started in the middle of 1997.

Meanwhile, several commission IX legislators led by Aberson Sihaloho urged the government to raise the country's current tax ratio of around 10.7 percent to near the 17 percent of neighboring countries.

"The low tax ratio indicates leakage or tax evasion," Aberson said.

But finance minister Bambang Sudibyo said the government was realistic in setting its tax revenue projection.

"We don't want to send the wrong signal to the market," Bambang said, adding that increasing the country's tax ratio to the 17 percent level would be impractical considering the current economic condition.

Director General of Tax Machfud Sidik said the country needed five years to reach a tax ratio of 15 percent.

In a written answer to the House, Bambang said that the Indonesian Bank Restructuring Agency (IBRA) was currently managing around Rp 442.8 trillion worth of various bank assets, compared to the agency's earlier estimate of nearly Rp 600 trillion.

Bambang did not explain the discrepancy, but it appeared to confirm prevalent fears that the value of IBRA's assets has declined.

He also said the estimated recovery value of the assets was only around Rp 171.4 trillion.

IBRA is expected to raise Rp 17 trillion in cash to help finance the current state budget ending in March. The agency has so far raised around Rp 12 trillion.

The agency expects to raise Rp 3 trillion from the sale of its 45 percent stake in auto giant PT Astra International and another Rp 3 trillion from the initial public offering of Bank Central Asia (BCA).

The agency has targeted raising more than Rp 16 trillion to help finance the April-December 2000 state budget. (rei)