Govt fails to finish drafting tax laws

Govt fails to finish drafting tax laws

Rendi A. Witular, The Jakarta Post, Jakarta

The directorate general of taxation has not been able to
submit drafts on the amendment of three tax laws to the House of
Representatives as scheduled in February, according to a senior
official.

Secretary of the tax reform team Robert Pakhpahan told The
Jakarta Post on Monday the drafts had yet to be approved by the
state secretary, a key requirement before being discussed by
other related ministries.

He said that after completing the discussion with the
ministries, the drafts would have to be approved first by the
President before they were submitted to the House of
Representatives for deliberation.

"We are still awaiting approval from the state secretary. We
have no idea when the drafts can be completed," said Robert, who
is also an acting director for value added tax and luxury tax at
the tax directorate.

The directorate general of taxation has drafted amendments to
three tax laws: Law No. 16/2000 on general taxation arrangements
and procedures, Law No. 17/2000 on income tax and Law No. 18/2000
on value-added tax on goods and services and luxury sales tax.

The directorate initially hoped to submit the drafts to the
House in January, but it was delayed till February. The time
schedule is contained in a government White Paper that basically
highlights key reform programs to be implemented by the
government after graduating from the International Monetary Fund
bailout program earlier this year.

Analysts said that the failure to complete the drafts on
schedule had shown that the government was not disciplined enough
to implement action plans included in the White Paper, which
become a benchmark to measure the government's seriousness in
improving the country's economy.

However, according to sources at the tax directorate and the
Ministry of Finance, the government had intentionally delayed
completion of the drafts because of a recent proposal by the tax
directorate to be independent from the Ministry of Finance.

The corruption-infested tax directorate is currently under the
auspices of the Ministry of Finance.

"The state secretary had to postpone issuing the approval,
pending the President's decision on the separation plan," the
sources said.

As previously reported, officials at the tax directorate
planned to adopt a similar system used by the U.S. Internal
Revenue Service (IRS). The IRS, a branch of the U.S. Department
of the Treasury, is tasked only with the collection of taxes and
enforcement of tax laws.

But the IRS commissioner and chief counsel are selected by the
president and confirmed by the senate, meaning that they are
directly responsible to the president and not to officials at the
Department of the Treasury.

Tax officials recently lobbied President Megawati
Soekarnoputri on the plan.

Director general of taxation Hadi Purnomo recently denied the
existence of such a plan, while Minister of Finance Boediono only
grinned when asked to confirm it.