House to ask government to raise 2000 tax revenue target

JAKARTA (JP): House of Representatives Commission IX for the state budget and banking wants the government to revise upward its tax revenue target for the 2000 budget.

The head of Commission IX, Sukowalujo Mintohardjo, said on Monday there was still room to increase the tax revenue target because the country's current tax to gross domestic product (GDP) ratio was still low compared to neighboring countries.

He also said that past experience showed that the government tended to always surpass its tax revenue target.

"We will ask the government to raise its tax revenue target in 2000," Sukowalujo told reporters following the commission's first internal meeting on the April-December 2000 state draft budget proposed by President Abdurrahman Wahid's administration last week.

He said the legislators did not specifically by how much the tax revenue should be revised.

Under the draft budget, the government has set its tax revenue target at Rp 97.78 trillion or around 10.6 percent of GDP -- as compared to 17 percent in Thailand, 37 percent in Malaysia, 21 percent in Singapore, 19 percent in Brunei and 16 percent in the Philippines.

The House is scheduled to approve the state budget proposal on Feb. 29 after it has been debated with the government.

Several economists and businesspeople have said it would be difficult for the government to achieve its tax revenue target this year because of the still weak economy.

But Sukowalujo believes the government can push itself to the upper limit to obtain a greater tax revenue.

"There are still loopholes ... there are still people (and companies) who can get away without paying taxes," he pointed out.

Sukowalujo also said that from now on, the main source of financing of the state budget should come from taxes.

He said the House would ask the government to immediately design a law on taxing private wealth to allow the government to widen its source of tax in the future.

He said that under the current tax regime only land and buildings were defined as wealth.

"There are other forms of wealth that must be treated as taxable objects," he said.

The government is currently designing a new law on tax as part of efforts to reform the country's tax sector. The government is scheduled to submit the new law next month to the House.

Newly appointed director general of taxation Mahfudh Sidik said last week that his office was considering raising the personal income tax level up to 35 percent as part of the tax reforms.

The current personal income tax level ranges from 10 percent to 30 percent and also applies to corporate income tax.

He said that under the tax reform plans, the income tax of companies would be set at a flat rate of 25 percent.

The government has reclassified corporate and personal taxpayers into four groups according to size to improve taxation auditing and targeting large taxpayers.

Mahfudh said that obtaining the tax revenue target in the 2000 budget would be a tough job. He said it could only be achieved if the economy continued to recover.

In a bid to improve tax revenue, the government under its agreement with the International Monetary Fund, will abolish tax holidays it promised to grant certain new investment projects and replace those facilities with an investment tax allowance.

The government is also likely to abolish tax free zones, like those in Batam, Rempang and Galang islands in Riau.

The government will also abolish certain tax break facilities, and value-added tax exemptions, like those on capital goods. (rei)