Minister cautious on idea to free workers from taxe

JAKARTA (JP): Minister of Manpower Abdul Latief cautiously welcomed the idea, from the city branch of the Federation of All Indonesian Workers Union, to free workers on the new minimum wage from income tax.

He said he could accept the idea in principle, but discussions with related offices and institutions were needed.

"Things are not that simple," Latief said when asked to comment on the idea during a visit to Tanjung Priok port, North Jakarta yesterday.

The government should raise the tax-free threshold to make the new minimum wage tax-free, said Federation chairman, Fauzie Ibrahim at a meeting at the City Hall yesterday. The meeting, on problems relating to minimum wages, was attended by all institutions and offices relating to manpower.

Also present were Deputy Governor on Social Welfare R.S. Museno and head of the city's ministry of manpower office Freddy P. Tuamelly.

The old minimum wage for Greater Jakarta workers was Rp 156,000/month and the new wage is Rp 172,500/month.

"We want the government to raise the tax-free threshold," Fauzie said.

According to Law No.10/1994 Article 7 (1), a single taxpayer with an annual income below Rp 1,728,000 (US$721.5) is exempted from paying income tax.

If the taxpayer is married, he or she is allowed to earn an additional Rp 864,000, if his or her spouse does not work, before having to pay tax. Rp 3,456,000 can be earned before paying tax if their spouse also works. Moreover, an extra Rp 864,000 for each member of the family (for up to three children) can be earned before paying tax.

Fauzie said citizens should pay tax. "But, the wage increase will not mean very much to the workers if they are subject to 10 percent tax," Fauzie said. Moreover, the new wage is still below the minimum life requirement.

Article 17 of the Law stipulates that people whose income is more than Rp 25 million have to pay 10 percent income tax, and those whose income is between Rp 25 million and Rp 50 million should pay 15 percent. People whose income is more than Rp 50 million should pay 30 percent in income tax.

"The minimum wage is 95,32 percent of the minimum life requirement," said Fauzie, who is also a member of the council's Commission E for social welfare.

He said the government made a commitment to make minimum wages in every region, including in the city, at least equal the minimum physical requirement by the end of the Sixth Five-Year Plan in 1998/1999.

In 1996, the minimum wage was an average 92.49 percent of the minimum life requirement.

The government announced the minimum wage level in all 27 provinces would be increased by an average 10.07 percent on Jan. 22. The new wages will be effective from April 1.

With the increase, the minimum monthly wage for a worker in the Greater Jakarta Area (Jakarta, Bogor, Tangerang and Bekasi) would increase from 156,000 ($68) to Rp 172,000 ($75).

At the start of the Sixth Five-Year Development Plan, the minimum life requirement will be calculated on the basis of the local cost of a daily calorie intake of 3,000 for a single worker.

To date, the government has calculated the minimum physical requirement on the local cost of a daily calorie intake of 2,600.

At the meeting, Museno urged all the city's companies to comply with the new government-set wages, saying it was intended to improve the welfare conditions of workers, their families, and the companies.

"They (companies) have time to prepare and adjust before the new wage comes into effect on April 1," Museno said, adding the new wages would increase workers' productivity levels.

He warned businessmen, who paid their workers above the new wage, not to lower current wages.

The new minimum wage ruling covers all workers -- regular workers and those under contract or on probation.

Workers employed on daily basis are entitled to be paid a rate based on the number of operational days of the company.

For instance in the city, if a company operates six days a week, the minimum wage for each worker should be divided by 25 days, making Rp 6,900 a day. If the company operates five days a week, the wage should be divided by 21, or Rp 8,214 per day.

This year's increase is the lowest in five years. The annual increases between 1993 and 1996 were 17.76 percent, 30 percent, 18.6 percent and 10.63 percent.

Freddy said companies could submit objections to the increase.

Last year, 173 companies in the city objected to the pay rise and 85 of them were exempted.

Under the labor law, employers who fail to pay minimum wages face three months in jail or a fine of Rp 100,000. (ste/04)