Govt criticized for revoking foreign exchange tax policy

JAKARTA (JP): The government was strongly criticized yesterday for revoking a decree on a planned 5 percent income tax for foreign exchange purchases.

Legal expert Dimyati Hartono and corporate lawyer Todung Mulya Lubis agreed the move did not encourage the much-needed legal certainty needed in the country.

They also agreed Minister of Finance Fuad Bawazier should have considered various legal aspects before issuing or revoking the decree.

Dimyati, a law professor at the University of Indonesia, said the decision could harm both national and international confidence in the country's economic system and tarnish the government's image abroad.

"Revoking the decree means that we (the nation) do not pay any respect to the law at all," he said, as quoted by Antara.

"In fact, legal certainty is one of the barometers used by the international community to observe our economic system and policies," he added.

Todung criticized Fuad for "ignoring the procedures" when he issued the decree Friday.

"The minister should have consulted the House of Representatives before he could declare it a decree," Lubis said Monday.

The planned income tax imposition was announced last Friday and scheduled to go into effect Monday. It was intended to curb further attacks on the rupiah.

Fuad Bawazier, however, announced Monday that he had revoked the decree. He said the decision to cancel the 5 percent income tax came after a series of negotiations between government officials and the International Monetary Fund (IMF) review team over the weekend.

Dimyati said legal certainty was one of the important elements for foreigners to determine whether or not they would invest here.

"Foreign investors would not like such a legal inconsistency, particularly so during the monetary crisis," he said.

The law professor said inconsistencies in the legal sector would discourage the international community's commitment to helping Indonesia survive the economic woes.

"Such inconsistency shows that the government has no sense of crisis and sense of urgency at all," he said.

"International and national confidence in our economic and legal systems should have been thoroughly considered before making any decision," he said.

Asked whether the Indonesian government was put under strong pressure by the IMF to cancel the income tax plan, he said: "Wasn't he (the finance minister) a member of the negotiating team with the IMF?". (imn)