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)