New tax bill expected to slash business cost

JAKARTA (JP): Legislators started their first round of debates yesterday on a government-sponsored bill on local taxes, user levies and service fees which they expect will slash high business costs.

Simon Patrice Morin of the House of Representative's Golkar faction said yesterday the bill should clearly define the responsibility of the central government and provincial, city and regency administrations.

"This way, there would be no overlapping responsibility, no double taxation... and the need to increase economic efficiency through the streamlining of various levies could be achieved," he said when presenting his faction's view on the bill.

House members of the United Development Party, Golkar, Indonesian Democratic Party and Armed Forces presented their views on the bill to Minister of Finance Mar'ie Muhammad at a plenary session.

Mar'ie was accompanied by his staff, including Director General of Tax Fuad Bawazier and the head of the ministry's Financial and Monetary Assessment Agency, Marzuki Usman.

The House members gave their views on three other government- sponsored bills: on taxes on transfer of ownership of land and buildings; on the collection of taxes using distress warrants; and on the taxation court.

Mukrom As'ad of the United Development Party faction said the bill on local taxes, user levies and service fees should clearly stipulate that the government's administration services must be free of user levies or service fees.

"This means nobody has the right to ask for a fee on public (administrative) services provided by the government," he said.

Mukrom said officials often illegally collected user levies or service fees for public services or licensing procedures.

"These illegal fees sometimes exceed the revenues from legal levies. This is also the reason why local taxes and user levies or service fees have become a national issue and a major cause of the high costs in the economy ," he said.

Mukrom praised the bill's provision which stops private companies and individuals "helping" local governments collect taxes, user levies or service fees.

He said the growth of regional tax revenue was much slower than the growth of central government receipts from nationally- administered taxes. The ratio between national tax earnings and gross domestic product (GDP) in the 1994/1995 fiscal year was 12.8 percent.

The ratio between provincial tax earnings and regional GDP was 1 percent, and between city/regency tax revenue and regional GDP was 0.9 percent.

The annual growth of tax revenues in the Fifth Five-Year Development Program which ended in 1994 was 26 percent for the central government, 23.9 percent for provincial administrations and 21 percent for city/regency administrations.

The annual growth of user levies and service fees for the same period was 26 percent for provincial administrations and 17.8 percent for city/regency administrations.

Setyadji Lawi of the Indonesian Democratic Party faction said the public had long awaited a ruling which specifically administered local taxes, user levies and service fees.

"Businessmen and other users of government services are often confused with the wide variety of local taxes and levies imposed on them. The problem is the imposition often is not based on clear criteria," he said.

"All they know is that for every service provided by local officials, there is a certain payment -- whether this is in the form of illegal fees, user levies, contributions or service fees. There are really no clear-cut differences between the levies," Setyadji said.

He said the government should improve taxation procedures and mechanisms.

"What is happening now is that there are no standard procedures and this loophole has often been exploited by local officials to impose user levies or collect service fees from the public," he said. (pwn)