Govt to abolish departure tax

Govt to abolish departure tax

Febiola Desy Unidjaja, Jakarta

The government is drafting a presidential decree to abolish the departure tax imposed on Indonesians who wish to leave the country, a measure that would lead to a loss of significant tax revenue but would support tourism in the region.

"It (the abolition of the departure tax) is just a matter of time," State Secretary Bambang Kesowo told reporters.

He projected the tax would not be included in the 2005 state budget, which the government and the House of Representatives will start deliberating next week.

Erman Radjaguguk, deputy cabinet secretary in charge of legislative drafting, explained that the government decided to do away with the departure tax as the policy had failed to achieve its original goal of discouraging Indonesians from traveling overseas.

"We have yet to receive a draft (of the presidential decree) from the State Secretary's Office, but the government plans to scrap the tax as it does not stop people from traveling abroad," Erman told The Jakarta Post.

The government first imposed the tax in 1994 as a measure to boost tax revenue.

In 1998, when the nation was mired in the worst phase of the economic crisis, the government raised the tax as part of the effort to discourage people from leaving the country and taking their money overseas.

Government Regulation No. 17/1998 increased the departure tax for air travellers by 330 percent from Rp 250,000 to Rp 1 million. It also raised the departure tax by 150 percent from Rp 200,000 to Rp 500,000 for those traveling overseas by sea and by 300 percent from Rp 50,000 to Rp 200,000 for those traveling overseas by land.

There are a number of occupations that are exempt from the tax, such as members of the diplomatic corps, government officials traveling on official business, and members of sporting and cultural missions.

The policy has sparked renewed criticism lately, particularly from the tourism industry, which sees it as a major obstacle to the growth of inter-ASEAN (Association of Southeast Asian Nations) tourism.

The ASEAN Tourism Association (Aseanta) has a stated goal of seeing the abolition of departure taxes throughout the region, and plans to discuss the abolition of departure tax for Indonesians at its meeting next year.

With the growth in the number of no-frills airlines in the region over the past two years, airline tickets to foreign destinations have become more affordable for many Indonesians. However, the departure tax often serves to dampen their appetites for travel as it is frequently more expensive than the airline ticket itself.

Meanwhile, the Directorate General of Taxation at the Ministry of Finance said there would be a potential revenue loss of Rp 1.2 trillion if the departure tax was abolished.

"We haven't heard about the plan. But the departure tax provides potential revenue of up to Rp 1.2 trillion a year," Hadi Purnomo, the director general of taxation, told reporters.

However, Hadi asserted that overall revenue targets could still be achieved even if the departure tax was scrapped next year.

For 2005, the government has targeted Rp 243 trillion in tax revenue, up from this year's target of Rp 219 trillion.