New tax laws

The Indonesian government took major steps to improve its financial and fiscal administration and discipline with the five new major tax laws. Yesterday, the House of Representatives passed bills covering local taxes and retributions, non-tax revenue, tax collection, fees on land and property rights and settlement of taxation disputes.

The House should be commended for its hard work over the last three months to complete the new bills which were submitted in December and January.

The great enthusiasm on the part of the House to enact the new bills before the end of its tenure in October is understandable. After all, the new legislation meets precisely the demands that the House had repeatedly called for -- better budgetary discipline and financial accountability on the part of the government.

The law on non-tax revenue governs the kinds of non-tax income that the government may raise. It also obliges the government to account for such revenue in the state budget. This means that when these new laws come into force, all government revenue and spending must be approved by the people through their representatives in the House.

Right now, a large portion of government spending remains outside House control because many kinds of government revenue have not been accounted for in the state budget. Not even the Ministry of Finance can estimate total government non-tax revenue. But everybody knows that such earnings are huge. Reforestation fees alone, to cite just one example, have accumulated to billions of dollars.

Accountability, however, is not the only issue related to non- tax revenue raised by the central government. The people, notably businesspeople, have become prey to official abuse of the authority to raise the various kinds of rents related to natural resource extraction and licensing procedures.

This legislation clearly stipulates that the central government's non-tax revenue shall only be derived from the management of state funds and assets, the exploitation of natural resources, public services, administrative fines, and measures based on court verdicts.

A similar multitude of taxes, fees and levies are also currently being collected by provincial and district administrations. These taxes and levies also will be realigned by one of the five bills approved yesterday.

This law will realign the numerous local taxes and retributions. Provincial administrations will be empowered to collect only three kinds of taxes: motor vehicle tax, the transfer of motor-vehicle ownership and gasoline sales. District administrations will be authorized to collect six kinds of taxes, namely taxes on hotels and restaurants, entertainment services, advertisements, street lighting, quarried minerals, and groundwater.

The law on fees related to land and building rights will generate another source of income for local administrations. Because, as they are different from property taxes which are collected annually, the fees will be raised on the basis of property transactions.

The other two laws -- regarding tax collections with distress warrants and the settlement body for taxation disputes -- are part of the ongoing program to improve tax collection and administration.

Tax officials will be granted more power to collect back taxes from taxpayers who are in arrears.

The legislation on taxation disputes should be good news. This is especially so for taxpayers who will soon have an independent body to settle any disputes they may have. The body, which will be set up under this law, will also handle disputes between businesspeople and customs officials over import prices and some tariff matters. This settlement mechanism is particularly needed because both the income tax and customs laws apply a self- assessment system.