Govt and House agree on a new regional tax law

JAKARTA (JP): The government reached agreement with the House of Representatives on Monday over a new version of the regional tax law which will give regency and mayoralty administrations greater powers in collecting taxes.

The House is expected to approve the bill amending Law No.18/1997 on regional taxes and levies on Thursday at a plenary session.

The revised tax law would come into effect on Jan. 1, 2001, in line with the implementation of the laws on regional autonomy and on intergovermental fiscal relations, which would grant provincial, district and mayoralty administrations greater powers in managing economic affairs.

The existing law is considered to be lacking flexibility for the regions in collecting various taxes and levies and still reflects an excessive domination by the central government over the regions.

Speaking to reporters on the sidelines of the final debate between the finance ministry and the House Special Committee, director general of tax Machfud Sidik said that under the new regional tax law, the provincial administrations would have the authority to collect four types of taxes, including tax on automotive vehicles, tax on fuel for vehicles, and tax on the use of groundwater.

Under the existing law, the provincial administrations can only collect three types of taxes.

The district and mayoralty administrations will be empowered to collect seven types of taxes, including taxes on hotels, restaurants, entertainment, advertising, construction materials and industrial minerals and parking.

But, the new version of the tax law also stipulates that district and mayoralty administration are empowered to create new types of tax or levies as long as they are in line with the criteria set in the tax law.

According to the existing law, the regional governments can only collect a maximum of 30 types of levies.

Machfud said that according to the new tax law, the new types of taxes or levies to be introduced by district or mayoralty administrations cannot duplicate those which have been imposed by the central or provincial government.

He also said that the tax subjects must be located in the district or mayoralty concerned.

He added that the new type of tax must not be against the interests of the general public.

"So, if the new type of tax would cause disruption or damage to a certain business, it should be canceled," he added.

Machfud warned provincial and district administrations not to be over zealous in collecting tax revenue once the regional autonomy policy is implemented.

He said that an overaggressive tax policy would only impose too many burdens on the people and discourage both local and foreign investment.

He also urged the regional governments not to focus only on collecting taxes but also improve the quality of their services to the public. (rei)