Mark-up results in uneven distribution of wealth

JAKARTA (JP): Minister of Finance Mar'ie Muhammad said yesterday that the mark-up of project values by irresponsible people impedes the even distribution of welfare.

Speaking at the seventh congress of the Indonesian Accountant Association in Bandung, West Java, last night, Mar'ie said mark- up practices occur because people want to get personal gains quickly and easily without considering the impact of their ill- doing on the society.

"Many professionals, including accountants, have not yet understood the large, negative effects (of mark-up), and therefore they collaborate in mark-up practices," Mar'ie said.

He noted that accountants, because of their profession, are involved in the decision-making process of either state or private projects.

"That's why I earnestly ask you, all accountants, to uphold your professional code of ethics and specifically contribute to efforts of national efficiency in using monetary resources," Mar'ie said.

The minister noted that mark-up practices will eventually result in the embezzlement of state funds because the money is used irresponsibly.

The government's tax revenues will also decline since the depreciation of the projects will burden the calculation of profits, which automatically affects the amount of tax they have to pay.

"Just count how much the government would lose from the mark- up if the target of investments in the sixth Five-Year Development Plan (Repelita VI) period is Rp 480 trillion (US$220 billion)," he said.

The value of depreciation, which is bigger than usual, will also hurt their products' competitiveness on the market, and thus they will seek protection from the government, either in the form of higher import tariffs for the same products or business management, Mar'ie continued.

When the products are already protected by the government, it will victimize the public because they have to pay more for the products than they should.

Mar'ie noted that mark-up practices are the potential source of bad debts. "If it (bad debt) happens, it will attract other serious problems, such as additional allocations of banks' equity and the writing-off of interest for certain periods of time." (rid)