New steps planned to boost tax payment

JAKARTA (JP): Credit card holders with a billing ceiling of more than Rp 10 million (US$952) will be required to have a tax identification number (NPWP) and to file annual income tax returns, Director General of Taxes Hadi Purnomo said on Tuesday.

He added that people purchasing cars worth more than Rp 200 million would also be required to have an NPWP.

These measures are part of a more intensive tax campaign which will soon be launched by the government to broaden the tax base, he said.

Hadi said that there was still enormous potential to collect a larger amount of tax from bank time deposits, pointing out that last year only around Rp 1.5 trillion was collected in withholding income tax on interest revenues from more than Rp 400 trillion in time deposits.

"I am optimistic that with such a vigorous tax effort, the 2001 tax revenue target can be achieved," he said amid some concern that the government's recent decision to cancel some of its tax measures would affect the 2001 tax receipt.

The tax revenue target this year is around Rp 180 trillion, of which around Rp 96 trillion will come from income tax.

But there has been concern that the government may not be able to meet the tax revenue target because of a recent delay in certain tax policies, including the plan to impose luxury tax on Batam Island and value added tax (VAT) on agricultural products.

Hadi said that the luxury tax on Batam Island would be delayed for one year.

He said that the government would explain to the International Monetary Fund (IMF) its decision to delay the tax policy.

An IMF mission is expected to start discussing the country's economic reform program with the government on Wednesday.

The mission arrived late on Tuesday.

The government delayed the imposition of the luxury tax due to the unclear status of Batam; whether it was a bonded zone or a free trade zone.

The law to determine the status is still being prepared.

Batam Island in the Riau archipelago near Singapore was declared an industrial-bonded zone by the government in 1978 to attract foreign investment.

In 1998, the government decided to introduce luxury tax on the island because, despite its status as an industrial-bonded zone, Batam also has noncommercial inhabitants.

Massive protests from Batam residents and foreign investors prompted the cancellation of the decision, which was originally to take effect in April last year.

Hadi said that the delay would not create much effect on the 2001 tax revenue target because the luxury tax from Batam Island was only expected to be around Rp 100 billion.

But former director general of taxes Machfud Sidik said previously that the tax loss would be around Rp 300 billion.

The government also decided to postpone earlier plans to impose VAT on agricultural products amid protests from farmers and to collect income tax from the central bank. The VAT is feared to make local agricultural products less competitive in the international market.

But the government raised the flat income tax on the interest income of time deposits to 20 percent late last year from 15 percent.

The decision received strong protest with some bankers warning that the measure would trigger capital outflow. But the new rate remains effective.

Minister of Finance Prijadi Praptosuhardjo has said that tax revenue would play a critical role in the 2001 state budget amid signs that the budget deficit would be greater than initially projected due to the weakening of the rupiah and the rising domestic interest rate.(rei)