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