House Commission accepts 1997/98 draft budget

JAKARTA (JP): The House of Representatives Budget Commission accepted the 1997/1998 draft state budget yesterday but urged the government to increase direct tax revenue.

Legislator Sa'di Zen Noor of the United Development faction said the government should reenact direct taxes like inheritance and wealth tax to enhance a more equitable income distribution.

"Our efforts to increase revenue from direct taxes have been hindered by the fact that our direct taxes have been limited only to income and property taxes," he said at the third round of budget deliberations.

The results of the deliberations, in which Finance Minister Mar'ie Muhammad was involved, will be brought to the fourth and final reading before legislators make it law.

Income tax, which is imposed on individuals and businesses, applies three progressive rates: 10 percent, 15 percent and 30 percent. Property tax is imposed on land and buildings.

Indirect taxes include the value added tax, luxury sales tax, excise, import duties, export taxes and many other local administration taxes.

The government, in its proposed budget unveiled in January, plans to collect Rp 73.2 trillion (US$31.74 billion) in non-oil and gas tax revenue in the 1997/1998 fiscal year which starts in April. This is a 14.2-percent increase on the Rp 64 trillion collected in the last fiscal year.

For the coming fiscal year, income tax is expected to contribute Rp 29.7 trillion, a 22.8 percent rise on the current fiscal year, while property tax is expected to raise Rp 2.5 trillion, up 10 percent from the 1996/1997 fiscal year.

Indirect taxes are expected to raise Rp 33.09 trillion, up from Rp 30.01 trillion this fiscal year.

"Revenue collected from indirect taxes are always larger than those from direct taxes ... So the government should gradually increase the proportion of direct tax receipts in the budget's tax earnings to create fairness," Sa'di said.

Yesterday House members also called on the government to continue deregulating the economy.

Murdhowo, a legislator from the Armed Forces faction, said the government should "consistently and continually" deregulate all sectors of the economy.

"This should be done by slashing every form of levy that has no legal basis. This will eliminate the high cost of doing business in the country," he said.

Sa'di said government revenue collected by "autonomous units" not accounted for in the state budget reflected the government's poor budgetary discipline.

"In 1996/1997 Rp 1.4 trillion in such revenues was not transferred to the state treasury because it was classified as autonomous unit income. In 1997/1998 this is expected to reach Rp 2.02 trillion," Sa'di said.

"Investigations should be made ... because it is very likely many other extra budgetary earnings and expenditures have not been accounted for let alone transferred to the state treasury," he said. (pwn)