Mechanism of tax law formulation criticized

Mechanism of tax law formulation criticized

JAKARTA (JP): Business leaders criticized yesterday the
government on its failure to involve private sector parties in
formulating the newly introduced tax laws, which according to
them have less diversified tax bases.

"The government seems to have relied too much on input given
by members of the House of Representatives, instead of tapping
multi-faceted views on tax practices from the private sector,"
the president of PT Bakrie & Brothers, Tanri Abeng, said in a
one-day seminar on the introduction of the new tax laws at the Le
Meridien hotel yesterday.

If the government had involved the private sector in preparing
the new tax laws, it would have been able to expand the bases of
tax collection to cover not only conventional businesses like
export-import activities but also new businesses of service, such
as goods distribution, brokerages and land transactions, he said.

Citing an example, he said that in the food and beverage
business, in which his company Multi Bintang Corp. has long
cooperated with distributors, there are some potentials of more
tax bases.

"Unfortunately, the government focused too much on law
enforcement instead of pursuing new tax bases," Tanri said in
response to the introduction of the new tax laws.

The new tax laws, which went into effect on Jan. 1, have
expanded tax bases to cover, among others, interest earnings from
savings or time deposits in overseas banks, mergers and share
sales by company founders. The government has so far issued 47
other regulations to support the implementation of the new tax
laws, which amend the old laws of 1984.

Suspicion

Achmad Fatchy, general manager of the legal consulting company
Biro Oktroi Roosseno, told the seminar that both tax officials
and taxpayers tend to be suspicious of each other.

Fatchy, who had previously worked as a government tax auditor,
said that officials usually lack knowledge on business practices,
making them fanatic on the implementation of tax ruling.

"As a result, the officials concentrate on the enforcement of
the tax ruling, instead of seeking more tax bases from the
taxpayers," he said.

An executive of PT Bank Utama, who insisted on anonymity, told
the meeting that the government needs to establish a forum
involving executives of the private business sector and
government officials to realign tax regulations.

He acknowledged that the government did organize various
seminars on tax "but they were held after the introduction of the
laws, not before it."

Both Tanri and Fatchy called on the government to reconsider
the imposition of new tax bases, even after the introduction of
the new tax laws, in a bid to increase revenues from tax
payments.

The government, under its budget plans, expects to collect Rp
40.08 trillion (US$18.2 billion) in tax revenues in 1994-95 and
Rp 45.03 trillion in 1995-96.

With the expanded tax bases, Tanri was optimistic that the
ratio of tax payments against the country's gross domestic
product could double from the current level of 13 percent.

For comparison, the tax ratio in Thailand is about 17.7
percent, in South Korea about 16.7 percent, in Malaysia about
15.2 percent and in the Philippines about 14 percent.(fhp)