Govt won't be 'too aggressive' in taxing foreigners: Official

JAKARTA (JP): The tax office "will not be too aggressive" at first in enforcing the new income tax ruling on foreigners working or living in the country, director general of taxation Machfud Sidik said on Thursday.

Machfud said the tax authority had yet to disseminate fully the information regarding the country's new income tax ruling, and must meet with foreign tax authorities to discuss tax-treaty issues.

"We have asked our tax officials not to be too aggressive ... we need more time to disseminate the information on the new tax ruling....," he said.

The new income tax ruling will become effective next year. Under the ruling, taxpayers will have to apply for their own tax identification number, locally known as a NPWP, report their income to their local tax authority and pay the taxes.

Under the current system, the income tax of an individual who has only one source of income is processed by his or her employer.

According to the country's tax laws, resident (local) taxpayers are subject to taxation on their worldwide income, regardless of geographic origin.

The laws also stipulate that any individual, including foreigners, who resides in Indonesia for more than 183 days during a 12-month period shall be treated as a resident taxpayer.

If an individual who lives in Indonesia and is categorized as a resident taxpayer sells or rents a house in the U.S., for example, he or she will have to pay the Indonesian tax authorities the difference if the tax rate in the U.S. is lower than in Indonesia.

"Taxes paid offshore on worldwide income can be credited against the Indonesian income tax," one tax official said.

Machfud said the worldwide income tax ruling was not new, having been introduced in 1984. However, he said that in the past the ruling had not been seriously enforced.

He said expatriates should not be overly worried because any possible conflicts could be resolved through specific tax treaties.

"We will honor tax treaties," Mahfud said.

There has been concern among foreigners the new plan could leave them facing double taxation.

Some have also aired their doubts about the professionalism of the country's tax officials, saying they were particularly worried about corruption.

The government expects more expatriates will be working in Indonesia as the country enters the era of globalization, and the government wants to tap this particular source of tax revenue.

Under the new Indonesian tax ruling, annual incomes of up to Rp 25 million (US$2,688) will be subject to 5 percent income tax; annual income of between Rp 25 million and Rp 50 million to 10 percent tax; between Rp 50 million and Rp 100 million 15 percent tax; Rp 100 million and Rp 200 million 25 percent tax; and above Rp 200 million 35 percent tax. (rei)