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)