New tax regulations fair, says tax expert

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)