Govt seeks more tax revenue from SOEs

The Jakarta Post, Jakarta

State Minister of State Enterprises Laksamana Sukardi said the government was discussing ways of raking in more tax revenue from state-owned enterprises (SOEs).

"More tax revenue should be tapped from the state enterprises," he told a press conference following a meeting with Vice President Hamzah Haz on the subject.

Laksamana said that the contribution of SOEs to the country's tax receipts had been relatively low compared to that of the private sector.

By comparison, he went on, the state had been receiving much more tax revenues from private companies than from state-owned companies operating in the same line of business.

He argued that the tax paid by a private company was often between three and five times greater than the tax paid by an SOE in the same business.

He said that tax receipts from SOEs only amounted to between Rp 15 trillion and Rp 16 trillion (US$ 1.6 billion) each year, with most of them coming from the banking sector, mainly in a form of taxes on deposits.

Laksamana said that the only way to boost the tax contribution of SOEs was to step up efficiency, and eradicate corruption, collusion and nepotism.

The low level of efficiency and flourishing corruption have long been regarded as the reason behind the poor performance of the SOEs.

While the details remained sketchy, Laksamana confirmed that such a goal was one of the main reasons why the government was moving ahead with its privatization program.

Privatizing the SOEs would improve their efficiency and transparency, which would in turn boost their revenues, meaning more tax receipts for the state.

The government is currently expected to sell off shares in 25 SOEs.

Indonesia has some 150 SOEs, most of which are inefficient, loss-making operations.

Many observers have called the enterprises cash cows for politicians and corrupt bureaucrats. This was particularly the case during the rule of former president Soeharto.

According to independent audits published late last year, five large SOEs labored under a combined total of $4 billion worth in inefficiencies, potential losses and lost reserves between 1995 and 1999.

The government has been trying hard to boost tax revenues as it has been running out of financing sources in its efforts to help balance the budget.

With huge expenditure pressurizing the annual budget, the government is desperately trying to scoop up as much as it can get on the revenue side.

For this year, the state budge has targeted a total of Rp 184.7 trillion (US$18 billion) in tax revenue.

Laksamana also disclosed that preparations were underway to determine the real outlay the government had incurred in the past when it bailed out troubled SOEs.

The government has often had to inject capital into SOEs suffering from mismanagement or project failure to prevent them from going to the wall.

"The government is going to take an inventory of the state enterprises that received such capital injections," he said.