Governor seeks legal basis for fuel tax

JAKARTA (JP): Although Governor Sutiyoso has backtracked on his plan for an automotive fuel tax in the wake of a strong public outcry, the administration is still counting on a clear legal basis for introducing the measure.

The City Council is scheduled today to begin drafting a bylaw regulating the taxes, expected to boost the administration's sagging revenues due to the prolonged economic crisis.

The governor postponed his plan to impose the 5 percent tax on automotive fuels Tuesday following the public condemnation. He said he would review it when the economic condition improved.

Councilors reiterated yesterday they would reject the proposal if the tax would be exclusive of the 71 percent increase in fuel prices set by the central government.

They argued the latter increase had already added to the burden of the public bearing the brunt of the economic crisis which started last July.

Councilors and officials have complained that the central government has yet to make it clear if the 71 percent fuel price hike was inclusive of the 5 percent tax.

They said the draft bylaw would regulate how the administration would administer the revenue from the tax if the 71 percent hike included the tax.

Chief of the United Development Party (PPP) faction, Achmad Suaidy, and his counterpart at the Indonesian Democratic Party (PDI), Lukman Mokoginta, made it clear the deliberation of the bill would not mean the council would change its stance.

Suaidy said: "We stick to our decision that we will strongly reject the tax idea if it is added to the 71 percent fuel price hike because, if that's the case, it will only burden the people who have been severely hit by the economic crisis."

The council is scheduled to decide on the bylaw on May 26.

"We hope that by that day, the central government will have decided whether the 5 percent tax is included in the 71 percent hike."

The administration has projected that revenue from the tax will reach Rp 36.5 billion a year.

City councilors questioned last week the application of a 5 percent tax on fuel, earmarked for the city administration as compensation for the sharp fall in locally generated revenues.

The introduction of the fuel tax was originally designed to compensate for a downturn in revenues from the passage of Law No. 18/1997 on the collection of local taxes and levies starting May 23.

Based on the law, the number of local taxes will be cut from 42 categories to only nine, and the number of levies from 192 categories to 30.

Jakarta administration revenues are currently derived from 13 different taxes and 44 different levies.

Suaidy said that the council decided to draft the bylaw because other provincial governments had done the same.

"There are other local administrations which have started deliberating the draft bylaw while waiting for the central government's announcement on the tax policy."

Lukman Mokoginta also said the City Council should draft the bylaw as other provinces had.

The government increased fuel prices early this week by between 25 percent and 71.43 percent, and electricity tariffs by 20 percent, to reduce subsidies and curb the state budget deficit. (ind)