Initial draft on new tax law completed soon

The Jakarta Post, Jakarta

The government expects to be able to finalize the initial draft of amendments to the tax law by the end of this month. The amendment is aimed at simplifying the tax structure and rates in the country.

Chief of the Fiscal Analysis Board of the Ministry of Finance Anggito Abimanyu announced on Wednesday that the draft was being studied by five top universities: the University of Indonesia, Gadjah Mada University, Diponegoro University, Airlangga University and Padjadjaran University.

"The academic draft is expected to be completed by the end of September 2003," he said.

The amendment of the tax law is part of the government's post- IMF economic reform program. According to the white paper, which details the program, after completing the initial draft, the government is expected to complete the final draft in December and submit it to the House of Representatives in January for deliberation.

The amendment of the tax law is part of the overall tax reform program. The Ministry of Finance is in charge of this program.

Simplifying the tax structure and rates is expected to help improve the investment climate by taking into account the rates and structures in neighboring countries.

Indeed, according to Anggito, the main focus of the amendment of the tax law is corporate tax.

"Our focus is on corporate tax because it will help lure investment. The impact of every 1 percent cut in corporate tax rates would amount to trillions of rupiah," he said.

He explained that based on research by the aforementioned universities, corporate tax rates would be 22 percent, 25 percent and 28 percent.

The current corporate tax rates are 20 percent, 25 percent and 30 percent.

Anggito said it had been a proposed that luxury sales tax be abolished and replaced with duty.

Another issue is whether to impose value added tax on coal as long requested by local coal producers; and whether to exempt certain strategic commodities from tax.

"The benchmark is what is applied in other countries. We don't want the simplification of the tax structure and rates to cause a drastic drop in tax revenue," Anggito said.

Elsewhere, Anggito said that the government might not increase excise on cigarettes in 2004 and 2005 to help protect the industry.

According to the white paper on excise revenue policy, the government aims to establish an excise target consistent with the capability of the cigarette industry.