Govt seeking to boost tax ratio to 17-20%

Dadan Wijaksana, The Jakarta Post, Jakarta

Vice President Hamzah Haz said on Friday the country's tax ratio must reach between 17 percent and 20 percent to allow the state budget to allocate greater spending for economic development.

He said that spending for development was very limited because the state budget was heavily burdened with the cost of bailing out ailing banks.

He said that the government was determined to boost the current low tax ratio level of around 13 percent by expanding the number of taxpayers.

"We need to boost the tax ratio to 17-20 percent so that we can allocate more to accelerate economic development," Hamzah told reporters after submitting his tax forms at the Directorate General of Tax, but did not give a timeframe for when the target must be reached.

A tax ratio is the ratio between a country's tax income and its Gross Domestic Product (GDP).

The tax office expects to reach 3.5 million taxpayers in 2002, compared to 1.9 million last year. Tax revenue this year is expected to reach Rp 184.7 trillion. (US$18.4 billion)

By 2004, the government wants to see the number of taxpayers rise to 9 million.

Indonesia's tax ratio is among the lowest in Asia.

Economists have said that raising the tax ratio target is commendable but they warned that the government should avoid increasing the tax rate amid the current economic difficulties.

They also warned that boosting the number of taxpayers would create massive paper work that could lead to a serious problem as the tax office lacks sufficient professional staff.

Boosting incomes from tax payments has been high on the government's mind as it seems to have run out of sources to finance the state budget.

With huge expenditures continuing to put pressure on the budget, the government is desperate to rake in as much as it can get from the revenue side.

Meanwhile, Director General of Tax Hadi Purnomo said Friday that, as of March 15, his office had collected tax revenue amounting to Rp 30 trillion.

That amount is some 17 percent higher than the same time last year.

For this year, the state budget hopes to raise a total of Rp 184.7 trillion in tax revenue, of which Rp 88.8 trillion is expected to come from non-oil and gas income tax revenue.

As for last year, Hadi's office managed to slightly exceed the target of Rp 156.6 trillion after posting a tax collection of Rp 158.3 trillion.