'High-cost economy, exit tax stunt economic growth'

'High-cost economy, exit tax stunt economic growth'

JAKARTA (JP): The Indonesian Chamber of Commerce and Industry (Kadin) took aim yesterday at the country's high-cost economy and overseas traveling tax, saying that they stunt economic growth and discourage export activities.

Agus G. Kartasasmita, a Kadin deputy chairman, said in a hearing with the Budgetary Commission of the House of Representatives that the high-cost economy increased prices of export commodities and would further reduce the competitiveness of Indonesian products on the export market.

He pointed out that market distortions resulting from the high-cost economy would also lead to an increase in the country's inflation rate.

"Indonesia's high inflation rate is now no longer only a result of the high circulation of money, compared to the slow flow of goods... It is also caused by a high-cost economy resulting from serious market distortions," he said.

The country's inflation rate during the first 10 months of this year was recorded at 7.43 percent, as compared with 8.27 percent in the corresponding period of 1994.

Agus said that such market distortions included unruly practices of monopolies, oligopolies and business collusions as well as unfair business competition, bans on certain imports, non-tariff barriers and inefficient licensing procedures.

"We have no other choice but to increase competitiveness and efficiency on the micro level," Agus said.

He also urged the government to abolish the exit tax because it discouraged businesses from promoting their products overseas.

Each Indonesian traveling abroad is subject to an exit tax of Rp 250,000 (US$109) if he or she leaves the country by air, Rp 100,000 by ship and Rp 50,000 by land.

"The tax is especially unaffordable for our small-scale business people," Agus said.

As a result, he said, Indonesian business people tend to be passive players in the world market, while their foreign counterparts, who travel extensively, can play a more active role.

"If we want to succeed in exports, we must go after the 'bait'. We can't wait for it to come to us," he said.

The government introduced the tax in the early 1980s as a way of preventing Indonesians from leaving the country and spending foreign exchange abroad.

The tax can be used as an advance payment for income tax, which could be deducted from a company's tax bill at the end of the year.

The immediate impact of the policy then was a sharp drop in the number of Indonesians traveling to Singapore, which Indonesians then considered a shopping paradise.

Agus pointed out that other countries do not have such taxes, allowing their business travelers to come and go more easily. (pwn)