No VAT hike, please

No VAT hike, please

From Bisnis Indonesia

The government will shortly raise the price of fuel by 30 percent, the basic charge for electricity by 20 percent and Value Added Tax (VAT) by 2.5 percent. In my opinion, this decision is highly unrealistic and will be very difficult for most of the community to accept, especially in view of the hardship caused by the protracted economic crisis.

The planned hike in the VAT rate from 10 percent to 12.5 percent will place an undue burden on the community. The impact of this rise will be felt not by businessmen/companies but by the end consumers. Businessmen/companies will only collect the VAT; they never pay this tax.

In this case, does the government realize that this hike in the VAT rate will trigger price hikes and then, of course, a rise in the inflation rate. In the final analysis, it is the ordinary people that will have to bear the brunt of these increases.

The Director General of Taxation has said that the 2.5 percent hike in VAT will contribute Rp 4.2 trillion in VAT receipts. In my opinion, this is not so important as the budget deficit for 2001, set at Rp 87 trillion, is already too big. Is there not another alternative that won't result in even greater misery for the ordinary man in the street?

A better way for the government to raise tax receipts would be to broaden the tax base and to intensify tax collection.

The government could, among other things, net more individual taxpayers and those making false or inaccurate returns, or eradicate corruption, collusion and nepotism from tax offices (collusion between taxpayers and tax collectors).

Or, the government could raise the rate of Luxury Sales Tax as, obviously, those who pay this tax are the wealthy.

In general, the government could also raise the state's revenues by improving efficiency in important state enterprises like Pertamina, PLN, Telkom, eradicating fuel smuggling abroad and eliminating power theft.

EDDY

Purwakarta, West Java