Govt looks to boost tax revenue with higher cigarette prices
Govt looks to boost tax revenue with higher cigarette prices
JAKARTA (JP): The cash-strapped government plans to once again raise the minimum retail cigarette price in a bid to gain higher excise tax revenues this year, Director General for Customs and Excise Permana Agung said on Tuesday.
Permana said that he would meet with domestic cigarette associations to discuss the new plan soon.
"We are considering increasing the minimum retail prices again, but we have not yet decided by how much and when they would be increased," he said following a meeting with senior economic ministers regarding the state budget.
Permana said that the excise tax revenue target had been increased by Rp 500 billion (US$42.37 million) to a total of Rp 17.6 trillion this year in a bid to help maintain the 2001 budget deficit at 3.7 percent of gross domestic product (GDP).
He admitted that another increase in the minimum retail price of cigarettes would have a serious impact on producers, with the last increase already reducing output.
The government early last month raised the minimum retail cigarette prices by between Rp 15 and Rp 30 per stick.
The government uses minimum retail prices as the basis for calculating the excise tax owed by cigarette makers. Companies are permitted to set their retail prices at a level higher than the government's minimum retail price.
Cigarette companies usually rank among the country's largest corporate taxpayers.
The current state budget deficit could widen to a dangerous six percent of GDP due to a sharp weakening of the rupiah and rising domestic interest rates.
In a bid to maintain the deficit at the initial projection of 3.7 percent of GDP the government is considering several measures which focus on raising domestic revenue and cutting down spending.
Under the plan the government would increase tax and excise revenue targets by around Rp 3 trillion, to a total of more than Rp 172 trillion, particularly focusing on income tax and value added tax.
Director General of Taxation Hadi Purnomo said on Tuesday that his office would intensify tax collection and broaden the country's tax base to meet the new revenue target.
He expected that the relatively high oil price at present would make a significant contribution to meeting the new target.
Bonds
Meanwhile, Director General of Fiscal Decentralization Machfud Sidik confirmed on Tuesday that the government planned to issue around Rp 2 trillion in bonds to help maintain the budget deficit at a safe level.
Machfud said that the government would sell the bonds to wealthier provinces and districts. He declined to provide details on the structure of the bond issue.
The bond issue is part of the overall government plan to raise around Rp 5.2 trillion from the country's richer regions, including the possibility of selling government shares in state- owned enterprises (SOEs) and assets under the Indonesian Bank Restructuring Agency (IBRA), a unit of the finance ministry.
Machfud said that, according to the government's initial calculations, wealthier provinces and districts would enjoy between Rp 20 trillion and Rp 30 trillion surpluses in their budgets this year.
He said that under the plan, the richer regions would be expected to exchange part of their general grant allocation (DAU) funds with the government bonds, shares in SOEs or IBRA assets.
The DAU funds are distributed by the central government to regional administrations throughout the country to help finance their increased administrative responsibilities resulting from the new regional autonomy law launched earlier this year.
But Machfud admitted earlier on Monday that the central government would face a tough challenge persuading the richer regions to agree to the new plan.
Minister of Finance Prijadi Praptosuhardjo said on Tuesday that he would meet with the House of Representatives this week to start debating the proposed revision of the current 2001 state budget, which includes the various measures to limit the budget deficit.
Prijadi expected the debate to be completed by the end of this month.
The International Monetary Fund (IMF) has insisted that it would only make a new agreement with the government after the legislature approves the budget revision.
A new agreement with the IMF would pave the way for disbursement of the fund's third US$400 million loan tranche to the country. (rei)