Govt to get tough on taxpayers to offset losses

Rendi A. Witular, Jakarta

The government will get tougher on taxpayers to achieve next year's revenue target and to offset potential losses from the implementation of new taxation laws, a tax official said.

The 2005 draft budget projects revenues from taxes, including excise and import duties, to increase by only 9.3 percent, or Rp 25.3 trillion (US$2.81 billion), to Rp 297.5 trillion from Rp 272.2 trillion last year.

The target is moderate, considering that tax revenues have increased by an average 14.2 percent per annum over the past three years.

"Initially, we planned to increase tax revenues for next year by between 25 percent and 30 percent.

"However, we cut the target to only 9.3 percent to take into account potential losses caused by the implementation of new taxation laws," Wahyu Santoso, the Directorate General of Taxation's former head of tax potential, who was involved in drafting the 2005 state budget, told The Jakarta Post over the weekend.

Despite being moderate, the target will not be easy to achieve unless the government boosts enforcement, said Wahyu, who is now a senior official at the Central Jakarta tax office.

Law enforcement efforts would include detaining recalcitrant taxpayers, confiscating or freezing their assets and prosecuting them at court, he said.

Other solutions to achieve the target revenue are to expand the number of new taxpayers by simplifying administration processes, screening new taxpayers and encouraging people to obtain their registered tax numbers.

With such a program, the directorate expects the number of taxpayers -- individual and corporate -- to reach about 10 million by the end of 2005, from 2 million presently.

The directorate, which is under the auspices of the Ministry of Finance, 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 luxury sales tax and value-added tax on goods and services.

The outcome of the draft laws, which have been arranged by the government since late last year, remains uncertain, as President Megawati Soekarnoputri has thus far refused to approve them for deliberation by the House of Representatives.

According to the 2005 draft budget, potential losses from the enactment of the new laws will ensue primarily from the reduction of income tax for corporations and institutions to a flat rate of 28 percent, from the current maximum rate of 32 percent.

Other losses may result from the income tax adjustments for individuals, which will exempt people of a particular economic bracket from income tax.

Meanwhile, economist Chatib Basri said efforts to widen the taxpayer base would be more crucial in reducing potential losses from new tax laws.

He said detaining taxpayers could create worries in the business community, as they might fear tax officials would misuse their authority to extort taxpayers.

Ibox

Tax revenues (in Rp/trillions)

2004 budget 2005 draft budget Domestic Taxes 260.2 285.1

I. Income tax 133.9 141.8

a. Oil & gas 13.1 13.5

b. Non-oil & gas 120.8 128.2 II. Value-added tax 86.2 98.8 III. Property tax 8.0 10.2 IV. Property transfer duty 2.6 3.2

V. Excise 27.6 28.9 VI. Others 1.6 2.0

International trade tax 11.9 12.3

I. Import duty 11.6 12.0 II. Export tax 0.31 0.34

Total 272.2 297.5

Source: Ministry of Finance