Kadin wants tax amendments to conform to global standards
Urip Hudiono, The Jakarta Post, Jakarta
A powerful business group has reiterated its demand that the current tax reform plan leads to a tax regime that conforms to international standards of equity and competitiveness so as to ensure a favorable business and investment climate.
"Kadin fully supports the government's efforts at reforming the country's tax legislation for the betterment of the economy through higher tax revenues," M.S. Hidayat, chairman of Indonesian Chamber of Commerce and Industry (Kadin), said on Tuesday during a hearing with the House of Representatives committee discussing the draft tax amendment.
""We, however, would suggest that it also addresses several issues affecting the current tax regime that prevent it from being business-friendly by ensuring that it adheres to worldwide tax practices, and is consistent with its own self-assessment principle.
"The revised tax laws must also incorporate the principle of equality, and have competitive tax rates."
Conforming with international tax practices means the scrapping of some stipulations that are uncommon in the tax regimes of other countries, particularly penal sanctions for simple tax assessment errors, such as forgetting to completely fill in the tax form, Hidayat said.
"Imposing penal sanctions for such simple slip-ups represents the criminalization of administrative mistakes, which in other countries are only sanctioned with fines."
As regards the principle of equality, Kadin acknowledged the need for the tax office to have sufficient powers to fulfill its tax collection duties, but not to such an excessive level that could lead to potential abuses of power.
"Equality also means taxpayers have the right to enjoy easier tax rebate procedures, besides their obligation to pay taxes," Hidayat said.
Indonesian Employers' Association (Apindo) chairman Sofjan Wanandi said the new tax regime should, as part of the equality principle, begin using the term "taxpayers" in place of the term "those obligated to pay tax" -- the term currently employed.
"The old term comes from the colonial tax law, which was based on official assessment. We must change this as we now use the self-assessment principle, and because it better reflects the rights and obligations of taxpayers," he said.
Self-assessment was an essential aspect of the tax legislation, Hidayat continued, and it should be consistently followed to ensure legal certainty in the tax regime.
"In practice, tax officials, due to their excessive powers, can set the amount of taxes owed according to their own subjective assessments," he said.
The ideal situation should be, "if there is a dispute over this, taxpayers should only pay the amount based on their self- assessments. They are, however, subject to fines if it turns out that the amount is less than it should be. This is necessary to discourage dishonest taxpayers."
Meanwhile, Kadin deputy chairman Hariyadi Sukamdani explained that a competitive tax regime should not only mean one that had lower tax rates, but also the implementation of a "single tax payment scheme" for taxpayers.
"However, what we are seeing in the proposed amendments is multiple income tax charges, especially for institutional taxpayers such as companies. They are first taxed on their revenue, and then shareholders are also taxed on dividends," he said.
"We hope the revised tax legislation will address this issue, leading to a more competitive business climate."