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.