Govt turns down request for levies ruling exemption

Govt turns down request for levies ruling exemption

JAKARTA (JP): Minister of Finance Fuad Bawazier and Minister
of Home Affairs R. Hartono have turned down a request from East
Nusa Tenggara Governor Herman Musakabe to exempt the province from
the obligation to abolish most business levies in the province, a
local official said last week.

Joachim Reo, the head of the provincial revenue agency,
announced the rejection and said the province would lose more
than 30 percent of its local revenue, including Rp 50 billion
(US$6 million) from the sandalwood and livestock sectors.

"Our revenue was never less than Rp 32 billion before the
ban," Antara quoted Joachim as saying.

Last month Hartono abolished 73 levies and taxes imposed by
provincial, regency and city administrations throughout the
country. Their annual budgets are generated from central
government funds and local levies and taxes.

The minister also ordered all local administrations to
terminate all other levies and taxes not covered under the 1997
Law on regional taxes and levies.

The law, which came into effect on Jan. 1 requires the
government to cut the number of local taxes from 42 categories to
nine and the number of levies from 192 to 30.

Hartono's instruction itself will take effect on May 27.

"The instruction has become a headache for us," Joachim
complained.

In his agreement with the International Monetary Fund in
January, President Soeharto pledged to prohibit all local taxes
at all levels on goods to be exported.

To strengthen the country's competitiveness and market
integration, the government will also develop and implement a
one-year program to abolish taxes on interprovincial and
interdistrict trade.

"Any loss of local government revenue will be addressed
through a combination of local fuel taxes and transfers from the
central government," the agreement said.

Local authorities have the right to impose 5 percent fuel
taxes starting on April 1 and some property taxes. However, the
government has not issued any final decision on this tax.

The Jakarta city administration has complained that its
regional revenue would drop more than 15 percent, including in
parking fees and foreigner tax receipts.

The North Sumatra administration had said that its regional
revenue target for the 1998/1999 fiscal year will decrease by at
least Rp 18 billion from last year.

East Timor officials have warned that many city and district
administrations could no longer be able operate if they had to
rely on locally generated tax revenues and government subsidies.

The regent of Cilacap in Central Java, however, remains
optimistic that he will be able to resolve the problems that may
ensue if the regency loses at least Rp 90 million, mostly from
fish auction fees.

"Fuel taxes will be sufficient to compensate for the
shortages," Chaeroni, the spokesman for the regency which has an
oil refinery, said. (45/prb)