Local taxes, fees bill 'to boost revenues'

JAKARTA (JP): The local taxes and fees bill aims to provide legal certainty and raise local administrations' incomes, Minister of Finance Mar'ie Muhammad said yesterday.

Speaking at a House of Representatives plenary session, Mar'ie said the new bill would reduce the number of taxes collected by local administrations.

To compensate for abolished taxes, the bill had new taxes which could generate more income, Mar'ie said.

He said simplifying and improving the structure of local taxes and fees was expected "to create a healthy climate for investment".

"With the simplification of local taxes and fees, local administrations could collect more taxes and fees with more economic potential," Mar'ie said.

The new taxes for local administrations include a gasoline tax, land-water tax and extraction and processing of minerals tax.

Mar'ie said the gasoline tax, set at a 5 percent maximum, could be local administrations' best earner.

Although the gasoline tax would be under the provincial administrations' jurisdictions, 80 percent of gasoline taxes would go to regencies.

The proposed maximum 20 percent tax on land-water exploitation was not only intended to generate local revenue but also protect the environment, Mar'ie said.

The bill on local taxes and fees sets a maximum 20 percent tax on the extraction and processing of minerals.

It sets maximum rates for other regency taxes: 10 percent for street lighting tax, hotel tax and restaurant tax; 25 percent for billboard tax; and 35 percent for entertainment tax.

Some local administrations already collect fees from land- water exploitation, extraction and processing of minerals, billboard tax and entertainment tax. These collections are usually governed by local rules.

Local administrations could introduce the new taxes between one and five years after the bill was passed into law, Mar'ie said.

"The sooner a local administration adapts its rulings with the new law, the sooner it can introduce the gasoline tax," Mar'ie said.

Mar'ie responded to questions from the House on three other bills presented by the government yesterday. The bills are on the transfer of land and buildings tax, tax collection with distress warrants and tax courts.

Mar'ie said all four bills would play an important role in providing a fair and clear legal foundation for tax collection.

The bill on the transfer of land and buildings tax stipulates that any transfer of land title or buildings worth more than Rp 20 million (US$8,400) is subject to a 5 percent tax.

The bill on tax collection with distress warrants empowers tax collectors to issue distress warrants, confiscation letters and debt-bondsman warrants.

The bill stipulates that a distress warrant can be issued if a taxpayer does not meet his tax obligation on time. Confiscation letters can be produced 24 hours after the issuance of distress warrants. A debt-bondsman warrant can only be issued with the consent of the finance minister or the head of a local administration.

The tax office can stop a person, with a tax debt of at least Rp 100 million (US$42,300), leaving the country for up to six months. This period can be extended twice.

The bill on tax courts governs the establishment of a tax court in Jakarta and, if necessary, tax courts elsewhere.

The court would handle disputes such as taxpayers' objections to tax officials' decisions, and complaints on the levying of taxes. (rid)