New laws on local taxes and levies

JAKARTA (JP): The government has to account for most nontax revenue in the annual state budget and local administrations have to abolish several taxes and levies under new laws the House of Representatives passed yesterday.

The House unanimously approved bills on local taxes and levies, fees on land and building rights, on tax collection with distress warrants, on tax courts and on nontax state revenue.

The laws, which still need President Soeharto's ratification, will come into effect on Jan. 1, 1998.

The minister of finance, Mar'ie Muhammad, said the passage of the five bills was an historic moment for Indonesia's financial legal system as they would provide the central government, provincial and district administrations and taxpayers with legal certainty.

"The five laws should enhance state and provincial revenue," Mar'ie told the House's plenary session.

The legislation on tax collection with distress warrants and on the settlement of taxation disputes (tax court) should help strengthen the implementation of tax laws, improve compliance and protect taxpayers from tax officials' arbitrary decisions.

Mar'ie said the government was now preparing implementation rulings, including government regulations, decrees and directives to enforce the five new laws.

All four House factions -- the Armed Forces, the dominant Golkar, the Moslem-dominated United Development Party (PPP) and the Indonesian Democratic Party -- supported the new legislation.

But the PPP Party faction's spokesman, Chozin Chumaidy, said laws themselves were not adequate and that it was urgent the government reduce corruption and collusion between tax officials and businesspeople.

"On one hand we continue to raise more revenue from taxes as the primary source of state income. But on the other hand, state funds continue to be embezzled in the disguised objective of national development," Chozin said.

Chozin urged the government and local administrations to abolish all regulations on the collection of levies or local taxes which the new laws do not govern.

The government and local administrations have five years to phase out existing regulations on taxes and levies which contradict the new laws.

"The government should become more disciplined in managing state funds," Mar'ie said.

The new laws require all government income from nontax sources must be accounted for in the annual state budget.

Under the legislation on local taxes and levies, provincial administrations can collect only three kinds of taxes. These are on motor vehicle registration, the transfer of motor vehicle ownership and gasoline sales.

90 percent of gasoline tax revenue, set at a maximum rate of 5 percent, should go to district administrations and the remaining 10 percent to provincial administrations.

District administrations can collect six kinds of taxes. These are on hotels and restaurants, entertainment services, advertisements, street lighting, quarried minerals and ground water.

The law on fees on land and building rights stipulates that any transfer of rights to land or buildings worth more than Rp 30 million (US$12,390) is subject to a 5 percent tax.

Eighty percent of revenue from this tax should go to district administrations and the remaining 10 percent to provincial administrations.

The law on tax collection with distress warrants empowers tax collectors to issue distress warrants, confiscation letters and debt-bondsman warrants to taxpayers who owe tax.

The legislation stipulates that distress warrants can be issued if taxpayers do not pay their tax on time. Confiscation letters can be produced 48 hours after distress warrants are issued.

The tax office can bar a person, with a tax debt of at least Rp 100 million, from leaving the country for up to six months.

The law on tax courts governs the establishment of a tax court in Jakarta and, if necessary, tax courts elsewhere in Indonesia.

Mar'ie said the court would handle disputes like taxpayer objections to tax officials' decisions and complaints about tax assessment.

The tax court will replace the Tax Arbitration Council, which proved ineffective in settling tax disputes. (rid)

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