New tax regulations fair, says tax expert

JAKARTA (JP): The recently issued tax regulations were fair enough and were unlikely to result in the government overtaxing its citizens, according to a tax expert on Friday.

Tax expert Tjahjo Joewono said that based on his evaluation so far most of the new tax regulations were acceptable.

"It's only natural that the government issued so many regulations after it had just amended the tax laws last year," Tjahjo told The Jakarta Post in an interview.

The finance ministry announced on Monday that it had issued 41 new polices, 38 of which were related to taxation and excise duties.

Tjahjo said these polices were part of the implementation process for last year's amended tax laws.

Analysts have hailed in particular the revised income tax law, which according to them reflected a greater sense of equity.

Tjahjo said that the government issued numerous tax policies when it replaced earlier tax laws in 1983 and 1995.

As last year's amendments came only five years after the tax laws were enacted, the issuance of the new tax polices appeared suddenly, he said.

He said that as the amended tax laws were an improvement per se, the accompanying tax regulations should not lessen the benefits of the amendments.

For instance, he said, some policies had made tax administration much easier, while others even offered tax facilities for new investment.

He said that the government aimed at raising its tax revenue from high earning taxpayers, as was evident from the hike in luxury sales tax on cars.

"Rich people will have to bear the brunt of the new tax polices," he explained.

However, he expressed his relief on hearing that the government had scrapped plans to impose value added tax of 10 percent on agricultural and animal husbandry products.

The proposal to tax agricultural products received wide criticism for fear that it would hurt local farmers and make them vulnerable to imported products.

President Abdurrahman Wahid subsequently revoked the regulation at the suggestion of Minister of Agriculture Bungaran Saragih.

Tjahjo also dismissed worries that the government was overtaxing its citizens, and he even suggested that the tax burden was actually too light.

"Our tax potential is actually huge, we can raise much more than we are doing at present," he said.

He suggested that the government boost its efforts to collect income tax from individuals.

Tjahjo said that one of the policies, a decree of the finance minister, required all eligible taxpayers to register themselves at their nearest tax administration office.

Under this policy, eligible tax payers must also fill out individual income tax returns in respect of what they earned from their employment as well as other income.

According to Tjahjo, this policy would allow the government to better tap the potential of individual taxpayers.

Director general of taxes Machfud Sidik has said that out of approximately 20 million potential private taxpayers, only 1.3 million were registered with his office.

Even then, he said, some 40 percent of the 1.3 million, or about 520,000 taxpayers, were fictitious as their names and addresses did not tally in some way.

"And not even all of the remaining taxpayers, who are categorized as compliant, pay their taxes in full," he stressed.

Machfud has said that he expected a threefold increase in the number of registered taxpayers within the next five years to about four million.

Separately, Lin Che Wei, research director at the Singapore- based SG Securities Pte. Ltd., advised the government to go after the tycoons who have been evading taxes.

"The working middle class like us have our incomes cut by taxes directly in our office; but not so tycoons," he said.

He questioned why the country's richest tycoons never made it to the top of the list as Indonesia's biggest taxpayers.

According to him, many of the rich businessmen preferred to resort to bribery instead of fulfilling their tax obligations.

But Indonesia faced a huge cultural barrier in implementing the tax policies effectively, Lin Che Wei said.

Many Indonesians, he said, do not regard the payment of tax as their duty.

People refused to pay taxes because they did not see the immediate benefits. On the other hand, not paying taxes did not hurt them either, he explained.

"We pay taxes, but the condition of the street in front of our house doesn't get any better, so where is our money going?" he asked.

Lin Che Wei suggested that the government hire an independent consultant to design a computerized tax administration system that would filter out unhealthy practices. (bkm)