Mon, 16 Oct 2000

Govt addresses expatriate taxation concerns

JAKARTA (JP): The Directorate General of Taxation has insisted that expatriates in Indonesia have to register with local tax offices and file tax returns in line with the a new income tax law that will come into force in January but assured them of a smooth implementation of the ruling.

The ruling was reaffirmed by Director General of Taxation Machfud Sidik and other senior tax officers at a meeting with tax consultants and representatives of foreign chambers of commerce here last week.

Tax consultants and foreign businesspeople have raised great concerns that the new ruling on expatriate taxation might not be conducive to wooing foreign investment in the country.

Income Tax Law No.17/200 defines foreigners who stay in Indonesia for more than 183 days within a year as resident taxpayers who must register with the tax office and lodge tax returns.

The law applies five different tax rates ranging from 5 to 35 percent with the highest rate applicable to an annual income of more than Rp 200 million (US$22,700).

One tax consultant, who attended the meeting, quoted a senior official of the income tax directorate as saying that as his office was under strong pressure to raise income tax receipts it would take the enforcement of the ruling seriously.

The 2001 draft budget, which is currently under deliberation at the House of Representatives, sets the target of income tax revenue at Rp 93.07 trillion (US$10.5 billion) or as large as 6.6 percent of the gross domestic product.

The income tax directorate, however, assured foreign businesspeople that it would cooperate closely with tax consultants and foreign chambers of commerce to ensure smooth implementation of the tax ruling.

Tax officials also assured expatriates that tax audits on individual taxpayers would be conducted only on a selective basis and would be limited in number, according to one tax consultant who preferred anonymity.

"They also assured us that tax audits will be notified through tax consultants or representatives of foreign chambers of commerce to avoid any unreasonable demands or pressure on individuals," the consultant said.

Taxpayers have always dreaded tax audits, claiming that tax officials often impose arbitrary assessments and use discretionary power to interpret tax rulings.

The consultant added that the income tax office also promised to cooperate with tax technical specialists of foreign chambers of commerce in the enforcement of the tax regulation, in identifying and solving technical issues and in producing an English version of the individual tax return form. (vin)