House calls for revision of wording in tax bills

JAKARTA (JP): The House of Representatives (DPR) called for the revision of four government-proposed tax bills yesterday, saying that they still contain many loopholes.

Spokesmen from the four House factions -- Armed Forces, Golongan Karya, the United Development Party (PPP) and the Indonesian Democratic Party (PDI) -- said the wording of a number of articles in the bills needed changing as they only contain general aspects of the tax collection system.

The four factions said that the articles dealing with special tax incentives for investors doing business in remote areas or other privileged economic zones are still too ambiguous.

"These loose articles are still open to abuse by both the government and the taxpayers," a spokesman of the Moslem- dominated PPP faction said.

Speaking during the first day of the tax bill deliberation, the small PDI faction also questioned the fairness of the government's proposed income tax rates.

"We want a clear answer from the government as to whether the new tax tariffs really improve impartiality," said the spokesman of the PDI faction.

The faction earlier called on the government to introduce two different tariffs, one for individuals and another for corporations. It said that the income tax rates for individuals should be lower than those for corporations. PDI also called for the introduction of more than four income brackets to improve the fairness of the tax system.

Responds

Responding to the requests, Minister of Finance Mar'ie Muhammad said he shared the concern of the House members but said that it was impossible to state "all things" in all the rulings stipulated in the tax bills.

"In certain cases, the ruling should be flexible as they have to be adjusted to changing economic situations," the minister said in his response to House members' comments.

Mar'ie said that changing the wording of the articles, which the House members criticized for being too ambiguous and too loose, is still possible as long as the revisions would not create difficulties in their implementation.

The four tax bills will amend existing tax provisions and procedures, the income tax and value added tax (VAT) as well as the land and building (property) tax.

The government proposes a reduction in the income tax rates to between 10 and 30 percent from 15 and 35 percent at present. The proposed rate for the lowest income bracket of up to Rp 25 million (US$11,500) per annum is set at 10 percent. The tariff for the income bracket of between Rp 25 million and Rp 50 billion is 15 percent, for the income bracket of between Rp 50 million and Rp 75 million 20 percent and for the income bracket of above Rp 75 million 30 percent.

Under the present tax laws, the rate of the income tax for the lowest income bracket of up to 10 million is 15 percent, for the income bracket of between Rp 10 million and Rp 50 billion 25 percent and for that above Rp 50 million is 35 percent.

The income tax bill also seeks an increase in the amount of untaxable individual income to Rp 1.72 million ($822) from Rp 960,000 at present. The additional tax exemption for married taxpayers rose to Rp 864,000 from Rp 480,000, while the additional deduction for a wife will increase to Rp 1.72 million as compared to Rp 960,000 at present and the deduction for a child will be raised to Rp 960,000 from Rp 480,000.

The House set up a special team last week to deliberate over the four tax bills proposed by the government early last month. The 81-member team, chaired by Novian Kaman of the Golongan Karya faction, must complete the deliberation before the approval date of Oct.12, less than two weeks.

The House's two other teams are also currently working to ratify a bill on the World Trade Organization (WTO) and a bill on limited companies. The House is expected to endorse the two bills next month. (hen)