House approves budget but warns on deficit

House approves budget but warns on deficit

JAKARTA (JP): The House of Representatives approved the
1997/98 draft state budget without any changes yesterday, as it
has done since 1969, but suggested tax revenue be increased
further and the current account deficit reduced.

The House's four factions, which approved the budget at a
plenary session, commended the government for increasing civil
servants', soldiers' and pensioners' salaries.

But the budget, which is expected to balance at Rp 101.1
trillion (US$42.4 billion) or nominally up 11.6 percent on the
current budget, does not explicitly mention the salary increase.

"We understand the government's request not to openly discuss
the salary increase in fear of triggering inflationary pressures
in the economy," said the spokesman for United Development Party
faction Nana Djuhana Sutarya.

United Development Party and the other three factions --
Golkar, Armed Forces and Indonesian Democratic Party -- reckon
the salary increase had been accounted for in the 16 percent rise
in the 1997/98 personnel budget.

The four factions urged the government to further increase tax
revenue, especially from direct taxes (income and property
taxes), because the ratio of tax receipts against gross domestic
product (GDP) was the lowest in ASEAN at about 12 percent.

"True, the government has always surpassed its tax receipt
target. But this, we think, has not been brought about by
efficient tax collection but rather by the setting of too low a
target," Indonesian Democratic Party faction spokesman Marwan
Adam said.

Marwan recalled President Soeharto's observation when he
unveiled the draft state budget on Jan 6. The President said that
"if we can increase our tax ratio to just 16 percent, the level
already achieved by the Philippines, we will be able to increase
our revenue by Rp 21 trillion."

The 1997/98 budget, starting April 1, expects Rp 64.7
trillion, or 73.5 percent of total internal revenue, to come from
sectors outside oil and natural gas.

Internal revenue, estimated to reach Rp 88.06 trillion, will
finance 87.12 percent of total spending with the remaining 12.88
percent to be funded from foreign loans.

The factions also called for special attention to the
worsening balance of payments problem. The current account
(balance of trade in goods and services) deficit is projected to
reach US$9.8 billion in 1997/98 or almost 4 percent of GDP.

"We urge the government to make more concerted efforts to
expand exports because our trade balance, not including oil and
natural gas, has been in deficit over the last two years," Nana
said.

The Indonesian Democratic Party and United Development Party
factions urged the government to account for all nontax revenue
in the state budget.

"The state budget will never be particularly effective as a
fiscal tool as long as a large amount of nontax revenue is not
transferred to the state treasury," Marwan said.

The Golkar faction hoped nontax revenue would better be
accounted for when the bill on nontax revenue and fees being
deliberated by the House was enacted. (rid/vin)