House deliberates tax law revisions

House deliberates tax law revisions

The Jakarta Post, Jakarta

Legislators began on Monday the deliberation on the much-debated
tax law amendments, amid a difference of opinion between the
finance ministry and the business community on how the drafts
would affect the economy.

During the hearing, Minister of Finance Jusuf Anwar reiterated
the government's commitment to increasing state revenue from
taxation through creating a larger tax base, while also improving
Indonesia's competitive edge through various tax cuts.

"We will encourage more taxpayers (to pay taxes) by improving
the transparency and accountability of the current self-
assessment system and the whole tax administration," he said.
"The taxation (system) will be both business-friendly as well as
people-friendly."

Jusuf cited the improvements as the introduction of a time
limit for tax procedures and a special commission to supervise
tax officials and receive complaints from taxpayers. Meanwhile,
the value-added tax and income tax laws feature a progressive
taxation system in term of rates and the types of taxes, with
plans to scrap taxes on business activities such as mergers and
start-ups.

The ministry had expected the new tax laws to be implemented
by next year, but lawmaker Paskah Suzetta -- who chairs the House
team deliberating the bill -- had said it would likely be passed
sometime in 2007 as growing opposition, mainly from the powerful
Indonesian Chamber of Commerce and Industry (Kadin), would make
legislators scrutinize the drafts more carefully.

Things have now become more complicated with the Coordinating
Minister for the Economy Aburizal Bakrie -- the former chairman
of Kadin -- indicating support for Kadin by saying that the
government could accommodate views from industry players and, if
necessary, modify some clauses deemed detrimental to businesses.

Aburizal, however, stressed that any revisions should be made
during the deliberation at the House.

Although Kadin had participated in the drafting of the bills,
a controversy then arose when it was found out that the drafts
submitted to the House had left out most of Kadin's suggestions.

Kadin argued the bills could hamper the business and
investment climate here, mentioning the lack of equality between
tax officials and taxpayers, and the only gradual tax rate cuts.

Jusuf replied that the business community were complaining and
asking too much, when the government itself has "sacrificed" some
Rp 35 trillion (US$3.49 billion) in tax revenue to make the draft
as business-friendly as possible.

Aburizal has, however, denied that the revised tax laws would
result in major tax revenue losses, hinting a further rift with
the finance ministry on the issue.

Commenting on the current debate, economist and legislator
Dradjad H. Wibowo asked both parties to publicly back up their
views with clear-cut reasons.

"The government must show a detailed breakdown of the
potential losses from the tax reforms," he said. "The business
community, on the other hand, must also show how the economy can
benefit if more tax incentives are given."

The three bills to be discussed are Law No. 16/2000 on general
taxation arrangements and procedures, Law No. 17/2000 on income
tax, and Law No. 18/2000 on value-added tax (VAT) on goods and
services and luxury sales tax.