New fuel tax 'should be applied selectively'

New fuel tax 'should be applied selectively'

JAKARTA (JP): The planned introduction of a new 5 percent tax
on fuel should not be applied to all consumers, councilors said
yesterday.

Councilors were responding to the imposition of a new tax,
which still waits for approval from the Ministry of Home Affairs
after consultations with the Ministry of Finance.

On Monday the government announced a deregulation package
cutting local taxes from 42 categories to nine, and fees from 192
categories to 30.

The introduction of the fuel tax is expected to compensate
losses incurred from the reduction of tax and fee categories.

Hasan Dasy of Commission B for economic affairs and Helmy R.
Syihab of Commission C for city revenue, said separately the
application of the new tax should take into account different
income levels.

"Many people only use motorcycles," Hasan said.

Helmy said, nevertheless, the new tax could significantly
increase city revenue from the 4 million motorized vehicles
currently in operation in the city.

Government regulation No. 21/1997 states the tax applies to
Premium and Premix gasoline brands, meaning public transport,
which mostly uses diesel fuel, will not be subject to the tax.

Premium brand gasoline is now Rp 700 per liter, which will be
Rp 735 with the new tax.

The regulation does not state a specific reason for the fuel
tax. It only states provincial revenues need to be increased to
support autonomy, and that improvement of taxes and fees should
be focused on efficiency and better public service.

In a report last year, the World Bank suggested raising fuel
prices to help cover pollution costs.

Helmy said, "Although we have lost eight tax categories, city
revenue will be compensated by the new tax."

So far city revenue has come from 13 different taxes and 44
different fees this year. In 1996/1997, the fees and taxes
brought in Rp 1.7 trillion of Rp 2.8 trillion in revenue.

Eliminated taxes include a foreigner tax, dog tax, radio tax,
nonmotorized land and water vehicle tax, tax on transfer of
ownership of nonmotorized vehicles, slaughterhouse tax and an
alcohol tax.

Helmy declined to comment on the alcohol tax which recently
raised an uproar. Moslem groups charged that city efforts to curb
alcohol consumption through an increase of distributor licensing
fees was equal to legitimizing consumption.

"In the last fiscal year these (former) taxes amounted to
around Rp 6 billion," Helmy said. The cost in collecting them was
larger than the revenue they brought in, he added.

Apart from the fuel tax, the government's new regulation on
local taxes comprises of an annual 1.5 percent tax on motorized
vehicles; 10 percent tax on the first transfer of vehicle
ownership; 10 percent tax on hotels and restaurants; 35 percent
entertainment tax; 25 percent tax on billboards; a maximum 20
percent tax on street lights; 20 percent tax on 34 types of "C"
category mineral exploitation, such as granite and sand, and a
maximum 20 percent tax on ground water use.

Vendors

The new list of fees in government regulation No. 20/1997
still lists fees on markets, wholesale markets and stores, but
does not include a fee on sidewalk vendors.

Councilor Hasan said the government has yet to explain the fee
elimination, but said "the government should have good
coordination with local governments and understand" if sidewalk
vendor fees are eliminated.

So far, Hasan said, vendors have managed to bring in an annual
Rp 1.8 billion while city-owned market company PD Pasar Jaya,
through 160 markets, raised Rp 1.6 billion in city revenue.

Helmy said as long as vendors used kiosks provided by the
government, they would still need to pay fees and sanitation
levies for services.

Both Hasan and Helmy said the new regulation would mean
illegal levies "would have to stop". Rather than ending fees paid
by registered vendors, Hasan said it would be better if the city
"wiped out all fees paid by vendors to various parties, including
the mayoralty, organizations and other offices, by replacing the
institutions with one agency to draw fees from them." (anr)