New tax laws
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.