Income taxes from foreigners exceed the 2001 target

JAKARTA (JP): Income tax collected from foreigners from January to March has exceeded the government's target for this year, with Jakarta's expatriates contributing some Rp 63 billion (about US$5.94 million) from an original target of Rp 55 billion for the entire year (2001).

The head of the income tax office for foreigners at the directorate general of tax, John Hutagaol, said that income tax receipts from expatriates in Jakarta during the January to March period represented a more than 200 percent increase on those received last year.

"There has been an enormous jump in tax collection since we started our new tax campaign for foreigners last year," John told reporters following the launching of a taxation manual for expatriates in Indonesia.

He said that beginning this year, the income tax office for foreigners only monitored expatriates in Jakarta. Tax offices in other regions now combined handling foreigners' tax payments with local ones.

John said that, as most tax revenues come from Jakarta's expatriates, the government didn't have a target or possess data on tax potentials of foreigners residing outside Jakarta.

He attributed the boost in tax collection mainly on the government's aggressive move to tax foreigners' income.

He also didn't rule out that a recently passed law to tax expatriates' overseas earnings had also helped boost tax collection, though he was unable to say by how much.

Because of the higher-than-expected tax revenue, John said his office was adjusting its tax collection target, and might set it at over Rp 120 billion for this year.

"We're expecting additional monthly tax installments of about Rp 7 billion over the remaining nine months of this year," he said.

The bulk of this year's taxes were collected in March, when foreigners paid annual tax installments amounting to Rp 52.5 billion.

Taxpayers can choose between paying their annual income tax in one payment or in monthly installments.

The surge in foreigners' income tax revenue comes amid warnings that a new regulation to tax their overseas' earnings could impede foreign investment.

Under last year's amended tax law, foreigners working or living in Indonesia for more than 183 days in a 12-month period must report all their income, including that of overseas income to the local tax authorities.

John said that Indonesia had signed tax treaties with 47 countries, mostly developed countries, to exchange information on the income of their citizens.

"They (foreign tax authorities) are very open and transparent when it comes to seeking data on expatriates' overseas income," he added.

The lack of data, however, made it difficult to assess tax potentials of foreigners working here, he said.

According to him, many locally run businesses were in fact controlled by foreigners, who tried avoiding tax and the immigration authorities.

"We have, for example, many restaurants here whose owners transpire to be foreigners," he explained.

But according to him, the expatriate's sense of duty to pay taxes has grown since the government tried to make tax payment easier for them.

Starting last year, he said his office had changed its approach in taxing foreigners.

The government focused only on Jakarta expatriates, leaving out tax revenues from expatriates in other regions, he said.

John said his office is also seeking a friendlier approach, by treating foreigners as customers.

Directorate general for tax Hadi Poernomo said that with the launching of the taxation manual for foreigners, they would no longer have the excuse that they didn't understand the regulations.

His office is facing a tight tax revenue target of around Rp 180 trillion in this year's state budget.

Hadi said that delay in several taxes, such as on agricultural products might throw back the tax revenue target by Rp 9 trillion.

More pressure has arisen as worries surfaced that the state deficit would grow by 5 percent of gross domestic product as compared to an initial estimate of 3.7 percent.(bkm)