Lower tax rates won't hurt tax revenues: Mar'ie
Lower tax rates won't hurt tax revenues: Mar'ie
JAKARTA (JP): Finance Minister Mar'ie Muhammad expressed on
Saturday that the proposed cut in income tax rates will not cause
a downfall in the state tax revenues.
Speaking during a plenary session of the House of
Representatives (DPR), the minister said that the possible drop
in the state tax revenues could be overcome through a more
intensive tax collection system.
"In the short run, the cut might cause a drop in the income
tax receipts. However, a fall in total tax revenues is unlikely,"
he said in his reply to House members' queries about the
government's four tax bills.
Mar'ie said that expanding investigations of tax evaders,
coupled by stronger law enforcement, would offset the possible
fall in the income tax receipts.
"The cut in the tax rates will not, therefore, change the
government's tax receipt target," he said, referring to the
government's projection of an annual 17.3 percent increase in tax
revenues in the present sixth Five Year Development Plan
(Repelita VI) period.
The four tax bills will amend the existing four tax laws on
general tax provisions and procedures, income tax, value added
tax (VAT) on goods and services and sales tax on luxury goods as
well as property to strengthen competitive edges of the domestic
economy and to promote fairness in tax collection.
Cut
One of breakthroughs in the new tax draft is the significant
cut in income tax. Rates will be lowered to between 10 percent
and 30 percent from between 15 percent and 35 percent at present.
The new tax bill also expands the income tax brackets to four
from three at present.
The government proposes a cut in income tax rates to 10
percent for the lowest income bracket of up to Rp 25 million
((US$119,000) per annum. The new rate for incomes between Rp 25
million and Rp 50 million is set at 15 percent, for between Rp 50
million and Rp 75 million at 20 percent and for incomes above Rp
75 million at 30 percent.
Under the present tax law, the rate of the income tax for the
lowest income bracket of up to 10 million is 15 percent, for
between Rp 10 million and Rp 50 million is 25 percent and for
above Rp 50 million is 35 percent.
The bill also raises the tax exempt income both to single and
married taxpayers.
Another important aspect of the tax bill is the introduction
of a number of tax incentives to investors engaged in priority
business sectors and those operating in frontier areas.
The strengthening of the post-audit system is also an
important facet of the proposed tax amendment.
The House's members called the government in a plenary session
early last week to adopt a more effective system in expanding tax
bases so that the drop in the income tax rates will not
jeopardize efforts in lessening the foreign aid dominance in the
state budget.
Answering the House members' inquiries about the government's
proposal to empower tax officials to impound assets of taxpayers
believed to have evaded taxes, Mar'ie said that such a measure
will be the last alternative in the collection of tax.
"The confiscation of assets will only be carried out with
those who evade tax payments by, for example, hiding their
wealth," he said.
The minister also defended a plan to establish an independent
court to settle tax disputes between the government and
taxpayers.
The establishment of such a tax court is considered essential
in settling tax disputes, which have increased in recent years in
line with the rapid expansion of tax collection, the minister
said.
"Settling tax disputes in a special court will be more
effective," he said.(hen)