House forms special team to deliberate tax bills
JAKARTA (JP): The House of Representatives (DPR) set up a special team yesterday to speed up the deliberation of four tax bills which the government expects to be enacted in January.
The 81-member team, chaired by Novian Kaman of the Golongan Karya (Golkar) faction, is expected to start the deliberation of the tax bills proposed by the government early this month.
The government submitted the tax bills to amend the laws on general tax provisions and procedures, income tax and value added tax (VAT) as well as land and building (property) tax, all of which were enacted more than nine years ago.
Tax Director General Fuad Bawazier told newsmen yesterday that the existing tax laws had to be amended to accommodate new developments in the business sector and world economy.
The rapid changes in the global economy have forced developing countries, including Indonesia, to improve their competitive edge on the international market, Fuad said.
The Indonesian tax laws, therefore, should be amended to stimulate business development and consequently create more jobs and broaden the tax base, Fuad added.
The proposed changes in the income tax include the reduction of income tax rates to a range of 10 to 30 percent from the present 15 to 35 percent, and the addition of an additional, high end tax bracket.
Fairness
"The change in the tax brackets is important because it will improve fairness," Fuad pointed out.
The proposed income tax rates are 10 percent for annual incomes of up to Rp 25 million (US$11,494), 15 percent for those more than Rp 25 million and up to Rp 50 million, 20 percent for those more than 50 million up to Rp 75 million and 30 percent for those in excess of Rp 75 million.
Under the present tax law there are three brackets. The rate is 15 percent for the lowest income bracket, those earning up to 10 million, 25 percent for the middle income bracket, those earning between Rp 10 million and Rp 50 billion, and 35 percent for the highest income bracket, those earning in excess of 50 million.
Fuad did not see the highest tax rate as being unfair to upper middle income taxpayers.
"If we set the highest rate even higher, it may be counter- productive and antagonistic to business expansion," he argued.
He added that top income taxpayers may be prompted to bring their capital elsewhere if they were made subject to very high tax rates.
Fuad said that, unlike in the present law, the highest tax rate in the income tax bill can be lowered to a minimum of 25 percent and the layers of the taxable incomes can be changed without amending the law.
He said that the proposed rates will be enforced both for individuals and corporate taxpayers, to prevent business owners from engineering their tax payments.
He said that the proposed tax laws also provide incentives to foreign investors who reinvest their profits in the country. The bills also allow waste treatment, research and development and human resource development to be deducted from taxable incomes.
Fuad added that the tax bills also stipulate more clear-cut provisions on the rights and obligations of taxpayers and clearer definitions on the subjects and objects of taxation. (hen)